The consumers' watchdog has called for a review of the way the goods and services tax (GST) is calculated for items that also attract duty.
Currently, products like petrol, cigarettes and cars have duty added to them before the GST is calculated.
However, the Consumers Association of Singapore (Case) would like to see tax calculated on the pre-duty price.
The Ministry of Finance claims the current practice is common in countries other than Singapore.
But Case believes this places an extra burden on customers.
"Imposing GST on the excise duty is tantamount to double taxation," Case executive director Seah Seng Choon said. "We have checked with the GST Department and it said that if the excise duty is priced into the product, GST is payable. This is not only for cars and petrol - it applies to cigarettes and liquor as well.
"It is time the authorities look into this issue. GST is to be imposed on goods and services - and tax is not goods and services."
As an example of the current system, assuming a litre of non-premium petrol has a wholesale price of 55 cents a litre and the oil company has a gross profit margin of 80 cents on the litre, the GST of 7 per cent at this point would work out to be 9.45 cents.
But if the GST is calculated after the petrol duty of 56 cents is added, the tax comes up to 13.37 cents - more than 40 per cent higher.
In dollar terms, the difference for cars is huge.
Assuming a vehicle has an open market value of $30,000, it should attract $2,100 in GST. But after the 20 per cent excise duty is applied, the car costs $36,000, and the GST becomes $2,520 - $420 more.
"Clearly, there is an anomaly here and there is a need for a correction," said Mr Seah.
"We shall be writing to the Tax Department to request for a review of this practice."
Case thinks that duty and the GST should be applied separately, so as to avoid having "tax on tax".
Motor Traders Association president Glenn Tan concurred, adding that the whole multi- layered car taxation scheme "should be reviewed".
Singapore Vehicle Traders Association president Neo Tiam Ting said it has also been calling for a review into the way the GST is applied to second- hand vehicles. It said the GST should be applied on net profit made by the used-car dealer, not gross profit.
"We last met them (the Finance Ministry) last month, and they still told us they could not accept our proposal," Mr Neo said.
The Ministry of Finance said the GST is "a tax on the final value of a good or service consumed in Singapore, which includes any duties imposed in the course of supplying this good or service".
It added: "Duties levied on petrol and cars are part of the final price payable for the consumption of petrol and cars.
"GST is thus payable on such duties...This is also the practice in other countries."
Explaining why the GST is not levied on a car's Additional Registration Fee or its certificate of entitlement, the ministry said these were "regulatory charges imposed by the Land Transport Authority on vehicle buyers".
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