JTI seeks MoH’s clarification on SST

In relation to any tax driven price increase, it is illegal for any tobacco manufacturer to absorb any quantum of the increase, says MD


JT INTERNATIONAL Bhd (JTI) has urged the Health Ministry (MoH) to clarify its position on the implementation of the Sales and Services Tax (SST) on cigarettes, as the company claimed that the ministry’s inaction has resulted in a price war in the market.

Its MD Cormac O’Rourke said the ministry must swiftly take the necessary action to prevent further confusion and ensure a level playing field in the market.

“In Malaysia, any cigarette price change is subject to regulatory approval by the MoH. In relation to any tax-driven price increase, it is illegal for any tobacco manufacturer to absorb any quantum of the increase,” he said in a statement.

Both the MoH and Ministry of Finance (MoF) had issued statements that tobacco companies were prevented from reducing prices equivalent to the 6% Goods and Services Tax (GST) imposed on their products when the GST was zero-rated on June 1 this year.

“Following the (re)introduction of the SST on Sept 1, the prices of cigarettes are by law required to be increased under regulations administered by the MoH.

“However, on Sept 5, JTI increased the prices for all its products based on the differential tax rates between the GST and SST,” he said.

O’Rourke added that the current situation, where the differences in prices set by tobacco manufacturers have triggered a pricing dynamic in the market, has not been seen in the country for many years.

“Based on our observations, it looks like there has been a rowback on certain cigarette brand prices in the market to pre-SST prices.

“The MoH must intervene and decide on a price point that properly takes into account the required pass-on of the differential rate of SST versus GST, as well as not allowing any company to gain a price advantage by discounting.

“This is to avoid any price advantage by way of price promotion, which is against the MoH’s own laws,” he said.