SST will not lead to significant price changes

Bernama

KUALA LUMPUR: The implementation of the Sales and Service Tax (SST), beginning Saturday, will not cause hardship to consumers as there will be no significant price hikes.

This is because the six per cent service tax and 10 per cent sales tax will only be imposed on certain products and services.

Finance Minister Lim Guan Eng has said that the SST would only be applicable to 38 per cent of the Consumer Price Index basket of goods compared with the 60 per cent under the Goods and Services Tax (GST) regime.

Essential and basic food items like margarine, tinned sardine, dairy products, coffee, tea, chilli and tomato sauce, cereal, tofu, eggs, flour, baby food products and bottled drinking water will not be subject to SST.

Also exempted are bicycles, motorcycles (below 250 cc), medicines, fishing boats, tractors, fertilisers and construction materials like sand, cement and bricks.

Federation of Malaysian Consumers Associations of Malaysia (FOMCA) advisor Datuk Prof Mohd Hamdan Adnan said he expected prices to remain the same as SST was a single-stage tax imposed only on manufacturers.

On the other hand, GST – which was enforced on April 1, 2015, and zero-rated on June 1 this year – was a six per cent consumption tax imposed on various goods and services specified by the government and being a multi-stage tax, it was payable by all parties in the supply chain, including consumers.

“If consumers feel the prices are unreasonable (after the implementation of SST), they should take action and complain to the authorities,” he said.

The government, he added, should publicise the necessary channel and phone numbers to enable the public to report any irregularity.

“Where this matter is concerned, consumers must do their part by complaining to the authorities so that they can take action,” he told Bernama.

Pointing out that SST was not the sole factor that influences price changes, Mohd Hamdan said there were also other contributing factors like the value of the ringgit that would have an impact on imported goods, as well as the supply and demand for certain products.

Urging consumers to be more sensitive to price fluctuations, he said: “Some people don’t know whether prices (of certain goods) have gone up or down.

They should keep themselves informed of such things, more so in the case of controlled items to avoid misunderstandings or being cheated by traders.”

Stressing that SST was not the main reason for price hikes, he said prices were also determined by global markets and even weather conditions.

“For example, when the weather is rough and the sea is turbulent, it is not impossible for the prices of fish to go up,” he said.

Mohd Hamdan, meanwhile, said the RM25 service tax to be imposed on credit cards following the implementation of SST was a good move as it may reduce credit card usage and prevent many people, especially the younger generation, from being entangled in debts.

“Many young people in their 30s are being declared bankrupt due to credit card (debts). We should not encourage the people to use credit cards... we certainly don’t want to turn into a society that is ‘rich’ in debts,” he added.

Senior lecturer at Universiti Utara Malaysia’s Centre for Economics, Finance and Banking Muhammad Ridhuan Bos Abdullah opined that while any form of tax policy would have an impact on the people, the government can use its discretion to offset its effects through various initiatives.

He said the government’s move to exempt several essential products and services from SST was beneficial to those in the B40 category (earning a monthly income of below RM3,000).

“In the short term, there might be a slight impact on the prices of goods and services but the price rise will not be big enough to burden the people,” he said.

He also urged the Ministry of Finance and Royal Malaysian Customs Department to provide clarifications and explanations on the SST’s implementation to enable consumers and traders to have a better understanding of its concept.

Kuala Lumpur International Chamber of Commerce advisor Datuk Dr Sharifuddin Musa, meanwhile, urged the government to keep monitoring the situation to ensure that the prices of goods and services remained under control.

“Failure to keep a check on the prices of goods will have an impact on manufacturers as it will affect their profit margin and financial performance as SST is a single-stage tax imposed only on manufacturers,” he said, adding that the tax is regarded as a cost because it is not refundable.

Sharifuddin, who is FM Plastic Industries Sdn Bhd chairman, said while his company was still waiting for further clarification from the government and Customs Department on SST, it has already done the necessary simulation to ascertain the tax’s impact on its operational costs.

“We have to do this (simulation) so that we can control (the price) in the event of an increase. The simulation differs from one product or service to another,” he said, adding that the manufacturing industry produces various types of products, including finished and semi-finished goods, with different tax rates for each of them.

The Dewan Rakyat recently passed the Sales Tax Bill 2018 and Service Tax Bill 2018 without any amendments.

SST will be implemented starting Sept 1, 2018. It replaces the GST which has been repealed.

The SST is expected to ease the burden on the people as the government will only collect RM21 billion in SST in 2019, compared with RM44 billion in GST previously.

As was the case previously, under SST the service tax will be imposed at six per cent and the sales tax at 10 per cent.

To date, about 77,000 businesses have been registered under SST through automatic transfer from the GST system.

Of the total, 32,577 have been registered for the sales tax and 44,874 for the service tax. © New Straits Times Press (M) Bhd