Last year, my colleague Louis Chua asked whether the administrative concession allowing hotels and restaurants to display prices excluding GST and service charge was still relevant. The Minister replied he did not think consumers would be confused.
But in 2022, IRAS had to clamp down on restaurants that were imposing nominal service charges—as low as 0.1%—specifically to exploit this loophole and avoid displaying GST-inclusive prices. These establishments were gaming the system to advertise lower prices while adding the charges at the end. If consumers were truly not confused by this practice, why did IRAS need to take enforcement action?
The real problem is that this exemption creates a perverse incentive. Restaurants that impose a service charge can advertise prices almost 17% lower than what customers actually pay. This is not about operational convenience—it is a competitive advantage that comes at the expense of price transparency.
IRAS justifies this concession by saying it helps restaurants manage pricing differences between dine-in and takeaway orders. But this rationale does not hold up. It is just as easy to display a full price and subtract a 10% discount for takeaway as it is to display a lower price and add a 10% service charge for dine-in. The arithmetic is identical—only the direction changes.
And this takeaway rationale cannot explain why hotels also enjoy the same exemption. There is no such thing as a takeaway hotel room.
In an age of electronic menus and ordering systems, it is anachronistic to cite the cost of printing paper menus as justification for denying consumers basic price transparency.
I urge IRAS to conduct a proper public feedback exercise. First, assess consumer demand for clear display of GST-inclusive prices. Second, estimate the actual cost to hotels and restaurants of modifying their menus and ordering systems. Let the evidence—not assumptions made three decades ago—determine whether this concession still serves any public interest, or whether it simply allows businesses to advertise artificially low prices at the expense of consumer clarity.
