The introduction of exemptions for necessities would complicate the proposed goods and services tax (GST) and raise compliance costs for businesses, says a government source familiar with the issue. Scheduled for release on Tuesday, the consultation document on GST will set out suggestions for an allowance and subsidy approach, rather than granting exemptions on selected goods and services items. An average family will be entitled to a water charges credit of up to $500 and a $3,000 rebate on rates every year. In a move to ease the financial pressure on lower income families, the document will propose a one-off relief payment to Comprehensive Social Security Assistance (CSSA) recipients in the first year of the introduction of the tax and an annual adjustment to CSSA payments. 'The upfront, one-off relief allowance is meant to maintain the purchasing power of CSSA recipients in the initial year of GST. The actual amount is yet to be determined,' the source said. Separately, low-income families not covered by CSSA could, after a declaration of their incomes, be eligible for an additional $2,000 cash allowance. Arrangements will be made with the Housing Authority to ensure public housing tenants could also benefit from the rates rebate. The source said that overseas experience in granting exemptions to selected goods and services items had complicated the tax system. He cited the example of Britain, where the rules on exemption on food items had come down to distinguishing hot dishes from cold ones. In Canada, any purchase of six or more doughnuts is treated as a meal and therefore exempted from GST. '[The Canadian example] has created the so-called doughnut club phenomenon, whereby customers simply wait outside doughnut shops to team up with others to buy six doughnuts or more,' the source said. He also questioned whether the lower income groups would gain the most from an exemption system, as higher income households tended to spend more on food and other daily necessities. 'We believe the approach set out in the paper will keep the scheme simple and administrative cost low. Introducing exemptions is not a good way forward,' the source said.