‘GST inclusive’ prices bad for margins

By FARA AISYAH / Pic By TMR

Businesses which have been selling goods inclusive of the consumption tax or absorbing the levy into their prices, will see their margins thinned further when the Goods and Services Tax (GST) rate drops to zero.

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) VP of economics research Koong Lin Loong (picture) said some retailers have been selling their products at “GST inclusive” prices and will not be forced to take lower profits once the GST rate becomes zero on June 1.

“There are also retailers who put their prices to be inclusive of the GST and the prices did not increase. But now that the GST has been reduced from 6% to zero-rated, they need to reduce their prices and their margin will be lower,” he told The Malaysian Reserve (TMR).

He said retailers are expected to comply with the GST Act despite the change in effective rates.

Koong lauded the government’s measure to slash the GST rate first before abolishing the tax. He also said the two- week transition to zero-rated GST is critical to businesses.

“We don’t want businesses to be interrupted. Can you imagine if the government announces that they will implement the zero-rated GST on Jan 1, 2019? Consumers will wait and not spend.”

However, some manufacturers are in the dark over the government’s plan to reintroduce the Sales and Services Tax (SST).

Malaysian Iron and Steel Industry Federation president Datuk Soh Thian Lai said the materials cost will temporarily decrease following the implementation of zero-rated GST.

“With zero-rated GST and no SST at the moment, the cost will reduce. Importers also do not have to pay GST and this will ease their cashflow.

“From June 1 until the unknown period, local manufacturers don’t have to pay the 6% GST anymore. But once the SST is implemented, we don’t know how the price will be because we don’t know the rate of the SST,” Soh told TMR.

He said the SST rate is normally between 5% and 10% and manufacturers will need time to readjust to the tax system which was abolished three years ago.