Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on July 18, 2018

KUALA LUMPUR: Not all products and services will be imposed the sales and services tax (SST) to be revived on Sept 1 this year, said Finance Minister Lim Guan Eng yesterday.

Guan Eng said in a statement yesterday the sales tax, to be applicable to selected manufactured and imported products, will have two different rates of 5% and 10% for different products.

“The 6% service tax applies to selected services and not all services, unlike the goods and services tax (GST),” he said.

A GST of 6% was implemented by the Barisan Nasional administration during Datuk Seri Najib Razak’s tenure as Malaysia’s seventh prime minister. It was zero-rated on June 1, and is set to be repealed, fulfilling one of  Pakatan Harapan government’s election promises.

Guan Eng’s statement came in response to an earlier statement by Najib that the GST burdened people less compared with the SST, which it replaced in 2015.

“False claims by Umno that the SST will burden the people even more than the GST is illogical when the SST collects RM23 billion less than [that of the] GST. According to them, my announcement that reverting to the old system of sales tax at 10% and services tax at 6% means the tax rate would be at 16%; higher than the 6% GST,” his statement read.

Guan Eng added that simply adding up the sales tax and services tax would be “equating apples with oranges”.

“The sales tax is imposed on manufacturers’ and importers’ price, while the GST is imposed on the final consumer price.

“Hence, it is wrong to claim that a 10% sales tax is higher than a 6% GST,” he said.

Guan Eng illustrated his point with an example where a manufacturer imposes a 10% sales tax (10 sen) on a can of soft drink manufactured for RM1. However, when the same can is sold to a consumer at, say, 7-Eleven for RM2, a 6% GST of 12 sen would have been imposed.

“In this case, it is clear a 6% GST at 12 sen would be higher than a 10% SST,” he explained.

Guan Eng said the expected collection from the SST is estimated at only RM21 billion for a full year, while the GST collection was expected at RM44 billion in 2018, according to the previous government’s projection.

“Hence, compared with the GST, the new Pakatan Harapan government has ‘returned’ RM23 billion to the rakyat,” he said.

Additionally, Guan Eng said the finance ministry (MoF) had conducted a comprehensive SST review exercise with the assistance of accounting firm PricewaterhouseCoopers (PwC) to simplify the impending tax.

“PwC will help rationalise tax collection and reporting requirements to ensure the SST will be even more efficient and less bureaucratic than the GST, or even the old SST system,” said Guan Eng.

Guan Eng added that the new SST is designed to ensure its impact towards the lower income group will be “proportionately less”, and that the details will be announced when the SST bill is tabled in Parliament during the current Dewan Rakyat sitting, which started on Monday.

The minister revealed on Monday that the SST would be set at 10% for sales and 6% for services.

He also said the new SST bill is expected to be passed in August.

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