Tighter enforcement needed to ensure SST’s success — tax expert

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KUALA LUMPUR (Aug 3): Prices of goods continue to rise notwithstanding the zero rating of the Goods & Services Tax, because the ministry of domestic trade and consumer affairs has failed to implement the Price Control and Anti-Profiteering Act, according to a tax expert who maintains reducing GST to 3%-4% is a more effective method to lowering prices. 

Refunds to businesses which ought to have been made within 14 days but which have been delayed to 30 days or more, are another issue as it has prompted most businesses to factor in the delay in GST refunds into their prices, pushing the cost of goods higher, said Axcelasia Inc chairman Dr Veerinderjeet Singh.

Unless these issues are properly addressed, Veerinderjeet said they would also compromise the effectiveness of the impending sales and services tax (SST).  

“The Domestic Trade Ministry has failed in implementing the Anti-Profiteering Act and maybe the Act needs to be changed, if it is difficult to enforce,” he said, alluding to its convoluted formula. 

“The formula was complicated but there was no attempt (by the Ministry) toward the change, hence it (application of the formula) will continue to apply to SST,” he told a press conference today after a seminar organised by Axcelasia on the reintroduction of SST on Sept 1.

“I think perhaps the Ministry may need more people well versed in accounting and the system to be able to monitor them (unwanted price increase).” 

During the tax holiday period between June to August, prior to the implementation of SST, the prices of goods have only reduced minimally, despite the scrapping of the 6% GST, Veerinderjeet observed.

“Hence, we should compare May (goods) prices including GST, versus September prices including SST, to see whether the prices of goods have really come down or not,” he suggested.

He reminded businesses that they were not to add the input tax to the cost of goods, as they were entitled to a refund of the input tax. 

“You (Businesses) cannot add it (input tax) into the cost of goods sold and increase your price. You are not supposed to do this, when you are entitled to get the refund of the input tax.”

However, he said the cost of living has risen, owing to a number of factors, including logistics and fuel cost increases. As such, GST is not the only reason for costlier goods.

“You must bear in mind that the price increases is not only due to GST, but also due to other reasons as well. The bottom line is that the rakyat are not happy with the cost of living. Don’t make it (GST) zero-rated and then introduce SST. The government should have left it (GST) at a slightly lower rate between 3% to 4% and not abolish it.

“So, I think the Ministry needs to listen to each trader and (get them to) justify why their prices increase. We haven’t heard any word from the ministry to explain why this (higher prices) was an issue, but we keep hearing the ministry and minister stating that prices have not really gone down substantially.”