Malaysia returns to SST

By RAHIMI YUNUS / Pic By BERNAMA

Malaysia has reintroduced the Sales and Services Tax (SST) effective Sept 1, 2018, just three years after the Goods and Services Tax (GST) was launched on April 1, 2015.

Under the SST, 6,405 items are now taxable, almost half of the 11,197 items listed under the previous GST, but with a higher rate of up to 10%.

Under the SST 2.0, 793 consumer goods are subject to be taxed at 5%, while 5,612 items are at 10%. Services in 25 categories are taxable at 6%.

The Pakatan Harapan government believes the SST is a more suitable tax regime for the upper-middle income economy and serves the rakyat better in economic terms.

“We put the welfare of the rakyat first before the government’s coffers. What is the good number for, if the rakyat is living a hard life,” Finance Minister Lim Guan Eng said at the SST media briefing last Thursday.

Putrajaya aspires to give more purchasing power to the rakyat in expense of the RM23 billion in revenue loss a year after the move from GST to SST. The SST is expected to accumulate RM21 billion per annum into government coffers, about half the RM44 billion GST would have brought in.

Lim said the RM23 billion deficit is a “gift” to the rakyat, who were bold enough to end the 60-year reign of Barisan Nasional.

While acknowledging the shortfall in income, he said the government has planned to compensate the deficit with bigger contribution from Petroliam Nasional Bhd, Khazanah Nasional Bhd and Bank Negara Malaysia, and with various belt-tightening measures.

For the remaining four months of the year, the government is projected to collect RM4 billion under SST.

Part of the money will come from the services tax on restaurants (that earned about RM4,200 per day will have to pay).

Under the SST 2.0, all restaurants with a turnover of RM1.5 million per year will be taxable at 6%.

Betting and gaming are new things set to be taxed under the SST. Hospital services including bed and food are exempted amid the prospects of medical consultation fee set to be revised upwards in the future.

Things such as goods, processed foods, juices, personal care items like shampoo, electrical appliances, watches, camera and spectacles will be taxed under SST.

Smokers must prepare to pay more for their cigarettes in line with JT International Bhd’s announcement that all its brands in Malaysia will be pricier.

“The company was disappointed the government had not reverted to the 5% SST rate imposed before the GST introduction,” its MD Cormac O’Rourke said in a release in the hours after last week’s media briefing on SST.

Big ticket items like aeroplanes, helicopter, yacht and snowboarding equipment also come under the sales tax. Cars are expected to be pricier too.

Lim believes the SST impact on prices would be half of the GST because the goods and services covered are fewer and the tax itself is a single-level tax, unlike the GST that is cascaded and easily can be abused by businesses at many levels of the supply chain.

The new SST covers 38% of the consumer price index (CPI) basket against 60% under the GST.

As such, Lim said the country’s headline inflation for this year is poised to drop to 2%, following the reintroduction of SST, from 3.7% in 2017.

He said the SST rates for consumer goods (the 0%, 5% and 10% rates) and the items are still subject for review, possibly to be put to a lower rate from10%to5%,or5%to0%,in the best interest of the rakyat.