11 February 2015
On 9 February 2015, the Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide, “GST Guide for the Market Participants in the National Electricity Market of Singapore (NEMS)”.
This e-Tax Guide explains the GST treatment of the supply of electricity, bilateral financial contracts and price neutralisation in the National Electricity Market of Singapore (NEMS).
The NEMS started trading on 1 January 2003. It consists of a wholesale market and a retail market. Electricity is traded in the wholesale market, operated by the Market Operator, through a “pool” system. Any company that intends to produce electricity (i.e. Gencos) is required to sell electricity to the “pool” and any company that intends to purchase electricity has to buy the electricity from the “pool”. The Market Operator buys the electricity at the nodal price and sells the electricity at the Uniform Singapore Energy Price (USEP). These prices are determined half-hourly at the wholesale market based on supply and demand.
The retail market is liberalised in phases. Contestability is granted to consumers in stages, starting with consumers with higher electricity consumption followed by those with lower electricity consumption.
The GST treatment of the transactions in the NEMS is summarised as follows:
| Sale of electricity: | Standard-rated supply | |
| Purchase of electricity: | Taxable purchase | |
| Bilateral financial contracts: | ||
| Contract for Differences | ||
| Net realised gain or loss by Genco / Retailer = Hedge Quantity x (Contract Reference Price – Hedge Price) | Exempt supply | |
| Settlement through Market Operator = Hedge Quantity x Uniform Singapore Energy Price (USEP) | No supply | |
| Payment for bilateral contract outside Market Operator = Hedge Quantity x Hedge Price | No supply | |
| Vesting Contract | ||
| Net realised gain or loss by Genco / MSSL = Hedge Quantity x (Vesting Contract Reference Price – Hedge Price) | Exempt supply | |
| Passing of vesting gains/losses by MSSL to Retailer | No supply | |
| Passing of vesting gains/losses by MSSL/Retailer to contestable consumer | Taxable supply | |
| Passing of vesting gains/losses by MSSL to non-contestable consumer | Taxable supply | |
| Passing of vesting gains/losses by Retailer to Genco (as part of the Contract for Differences between them) | Exempt supply | |
| Settlement through Market Operator = Hedge Quantity x (Vesting Contract Reference Price – Hedge Price) | No supply | |
| Price neutralisation for companies with embedded generator: | No supply | |
For full details, please refer the e-Tax Guide on the IRAS website.This e-Tax Guide replaces the IRAS’ e-Tax Guide on “GST Guide for the Market Participants in the National Electricity Market of Singapore (“NEMS”) (Third Edition)” published on 28 November 2011.
Source: This article was extracted from the Inland Revenue Authority of Singapore’s (IRAS) website. Visit http://www.iras.gov.sg/ for more information.