Malaysians divided on impact of SST

The elimination of the GST is generally welcomed by the public, who are hoping to see prices drop


In line with Pakatan Harapan’s election manifesto, Prime Minister Tun Dr Mahathir Mohamad’s government has zero-rated the Goods and Services Tax (GST) beginning June 1, 2018.

The Ministry of Finance (MoF) in a statement last Wednesday announced that the GST reduction from 6% to 0% will be implemented nationwide by the end of this month, and that the Sales and Services Tax (SST) will be brought back instead.

The elimination of the broad based consumption tax is generally welcomed by the public, who are hoping to see prices of goods and services fall as a result.

The SST is a single stage consumption tax where businesses cannot recover the tax paid on their purchases. This tax will be treated as a cost to the business.

Public opinion on the tax issue is divided, with the financially knowledgeable concerned that the removal of the GST would cut some RM43 billion in revenue collection this year — which may impact the country’s credit status.

Will the country fall into debt? And how will the new government make up for the shortfall of loss from the GST?

The common man’s expectations are for prices of groceries and services to cost less going forward.

To business owners, many are still in the dark about the entire thing. Will they need to scrap the charge altogether?

And what about the GST paid to their upstream suppliers? Will the SST see price rises for some goods and services?

Automakers Volkswagen Group Malaysia Sdn Bhd and UMW Toyota Motor Sdn Bhd have announced cuts in prices for their makes, while Proton Holdings Bhd in a statement last

week was unsure if prices of its makes would rise or fall with the change in the tax system.

Engineering doctorate degree researcher NG Senthelnathan said the GST was a structured taxing system that should have been regulated properly, but poor enforcement by government agencies gave traders the opportunity to take advantage by hiking up prices.

“The term ‘GST’ has become a phobia among Malaysians, thinking the GST is all about the former administration and how it used it to pay back debts.

“It will obviously reduce the price of goods, but now with the soon-to-be introduction of the SST, it will depend on how it is going to work,” Senthelnathan said.

He added that if the tax is purely based on sales, then it will be good news for traders.

Photo gallery MOCO: Capturing Life Moments owner Diane Lee said the cut in the GST is great news for her company.

“My business is not GST-registered in the first place because we are really small, so all the while we have been absorbing the 6%, which has taken a toll on my business,” Lee said.

Lee said while she has not been charging her clients the 6% rate, it will now turn into savings on her end.

Alexander Johnson — who previously owned his own food stall in Klang — said while it is a good move, it doesn’t necessarily mean the prices of goods will drastically drop.

“I think there might be a lot of confusion when the GST is set at 0% on June 1, 2018. So far there’s been no clear directive from the Customs (Department) or tax offices,” Johnson said.

He said it is definitely a positive move by the new government, but hopes the authorities will also be quick to regulate them, in case some try and take advantage of the situation.

“Some sellers might try and raise prices based on the fact that they paid the GST for the items from suppliers and distributors in the chain and (then) pass the buck on to customers.

“The general public, especially in urban areas, now seem to be well informed of events taking place. They should also play the role of reporting any wrong practices to the right authorities,” he said.

Naza Italia Sdn Bhd head of sales Kumara Sooriar Sivanasan said personally he welcomed the move by the new government, adding that it will definitely lower the cost of living for the average person; however, there seems to be a misconception that the prices of cars will also decrease.

“The zero tax is quite misleading, people are under the impression that cars will be cheaper, but that might not be the case. The way a vehicle (price) is calculated actually proved that it was cheaper with the GST included.”

“We as retail providers have seen somewhat of a pullback in the market, people are wanting to wait and see if vehicles will be cheaper or not,” Kumara said.

He said perhaps a clearer directive which is more finalised would be more helpful, as opposed to everything that has taken place so soon.

“We understand the current government is trying to recover losses from the previous administration, but as a business, until the SST comes in play, it is a pretty grey area,” he added.

For Shangeetha Balakrishnan, who will be opening her first learning centre in September, the wait-and-see attitude is how she will plan for her purchases.

“There will be a drop in prices once the GST is zero-rated, so I plan to do the purchasing then.

“It’ll be on a smaller scale, perhaps the cost will be less than RM10,000. I will most probably get the furniture and writing materials all from local stores,” she said.

Tax consulting services firm Thannees Tax Consulting Services Sdn Bhd MD SM Thanneermalai told The Malaysian Reserve (TMR) that people are very happy about the changes, especially since it took place so soon after the win.

“I think businesses are also very happy because they can just carry on with the system. Of course, there will be some practical issues, but it can be done,” he said to TMR in a telephone interview.

Thanneermalai added that the only confusing part will be during the time gap while waiting for the SST to be implemented.

“The question is where will the revenue come from. Of course, I foresee some challenges — such as for contracts that are already ongoing and such. But, it can all be resolved,” he said.

Malaysians divided on impact of SST