Malaysia’s new 6% GST kicks in today. Boon or bane for Singaporean shoppers? You decide.
Updated on 4 May 2015
No, it’s not an April Fool’s prank.
After years of pussyfooting, Malaysia has finally done it.
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Today, the country rolled out its new Goods and Services Tax (GST), set at 6%, which will replace the existing 6% tax on services and 10% tax on sales.
If you’ve been taking advantage of the falling ringgit and hopping across the causeway for weekend shopping sprees, go ahead and continue doing so. Just be prepared to see some nominal fluctuations in your shopping bill.
That being said, it’s not necessarily a bad deal. Depending on what you buy, the prices could either remain the same (okay…), increase (boo), or even decrease (yay!) for goods currently subjected to the higher 10% sales tax.
[Infographic Credit: The Straits Times]
In a nutshell, Malaysia’s GST is:
- Good news if you’re buying essential foodstuffs and groceries like rice, fresh meat, seafood, eggs, fruits and vegetables, coffee/tea powder, spices, medicine, and baby formula.
- It’s also good news if you intend to purchase big-ticket household items like TVs, refrigerators and furniture.
- Bad news if you enjoy buying processed food and “luxury” goods such as clothes, cosmetics, laptops and mobile phones.
- Also, if you’ve been pumping RON97 petrol for your car, it might be time to switch to RON95 instead, since RON95 petrol, diesel and LPG are exempt from GST, but not RON97.
There’s also an app you can download – the MyKira GST app – to check the prices of over 10,000 items.
For Singaporean shoppers out for a good bargain, it’s a square-off between cost savings and the new 6% GST on top of the proposed RM20 (SS7.60) vehicle entry permit. Which wins?
For now, it looks like the general consensus is: it’s still worth the trip across the causeway.
Out with the old, in with the new
Malaysia’s move to introduce GST has been a long time coming – the idea of a standardised GST was first mooted as early as 1992 (a year after Anwar Ibrahim was appointed Finance Minister) and scheduled for implementation in the third quarter of 2011. But it met with so much public resistance and mounting criticism that it was shelved until Prime Minister Najib Razak’s Budget reading last year.
With the introduction of the 6% GST, Malaysia joins the ranks of seven other Southeast Asian countries that already have a GST system in place. These are:
GDP Per Capita (USD)
(World Bank, 2013)
|Year of GST Implementation||Initial Rate (%)||Current Rate (%)|
At 6%, Malaysia currently boasts the lowest GST in the region. The federal government says that unlike the case in Singapore, it has no intentions of raising the figure.
From the looks of it, however, it does seem to be tracing Singapore’s footsteps in how it is shifting reliance away from direct taxation on individual and corporate taxpayers to indirect taxation.
Revenue generated from the 6% GST will go a long way towards plugging Malaysia’s widening fiscal deficit and inadequate tax-collection system, under which only an estimated 14.8% of employees and 11% of registered companies pay income tax.
With the implemented GST, the government hopes to trim its fiscal deficit from 3.5% of GDP last year to 3.2% this year, and also raise an estimated RM22 billion (S$8.15 billion) in additional revenue each year.
Not a timely move
Unlike the other Southeast Asian countries, Malaysia’s GST comes with a longer list of exemptions and zero-rated goods.
Certain essential goods and services, such as cooking oil, rice, sugar, fresh produce and electricity won’t be taxed, while others, such as clothes and electronic gadgets, will.
This makes it cumbersome for tax administration, but at the same time, it’s the government’s way of striking a balance between revenue collection and providing a social safety net for the poor. To further offset adverse reaction to the GST, the income tax rate will be reduced by 1 to 3% for individual taxpayers, and the Bantuan Rakyat 1Malaysia (BR1M) financial aid increased by RM300 for low-income families.
The problem is, is this enough to soothe public dissent and silence critics?
According to news reports, the implementation of GST has been a bitter pill to swallow for many Malaysians. As the day progressed, many of them took to lamenting on social media and protesting at their local customs offices.
Disgruntled shoppers were also flocking to malls and supermarkets over last weekend to stock up on essential goods, sparking concerns about a possible retail slump in the weeks ahead.
Owners of small- and medium-sized enterprises, too, have raised their confusion over tax submission, invoicing and accounting processes, and the possible need to raise prices in view of compliance costs to install new software and hire new accountants.
Additionally, the imposition of GST has prompted remonstrations from opposition parties, who claim consumers are being left with the bill for the government’s mismanagement of the economy.
It’s like adding fuel to the fire, considering how many Malaysians are already up in arms over the existing state of the economy, what with the ringgit currency plummeting on oil-linked concerns and investor fears over the stability of government investment fund 1Malaysia Development Berhad (1MDB), which is still mired in RM42 billion of debt.
The Malaysian government has been repeatedly trying to convince the public that there will only be marginal price hikes, and that mechanisms (such as the Price Control and Anti-Profiteering Act) are in place to prevent unscrupulous businesses from profiting from the GST.
Whether the public will swallow the argument, though, is another story altogether.
A sign of greater change to come?
Just last Friday, nearly ten thousand protestors marched down Kuala Lumpur in an anti-GST rally, calling for the GST to be abolished as it widened the income gap.
The protesters, who included members of opposition parties and non-governmental organisations, as well as parents and their children, gathered at five meeting points including Maybank’s headquarters and the Sogo shopping complex. Many of them wore red T-shirts with the words “Bantah GST” (Reject GST) and carried banners with slogans like “Anti-GST parade: This is not a protest, it is a process” and “We fight for a better Malaysia”.
One common sentiment among the protesters was that the GST increased their financial burden in the face of already soaring living costs. There was also a clear display of anger against Putrajaya, with some protesters saying the only way to put an end to the GST is by changing the government.
By the time the rally drew to a close on Friday evening, 59 protesters had reportedly been arrested. Protest leaders, including Negara-ku patron Datuk Ambiga Sreenevasan and DAP national organising secretary Anthony Loke, have also been called in for investigation under Section 143 of the Penal Code for unlawful assembly.
Not much is known yet about the investigation and how the protesters will be dealt with, but in our opinion, arresting people certainly isn’t going to help the situation. If anything, it’s just jumping from the frying pan into the fire. If the public gets increasingly riled up, who’s to say that there won’t be subsequent (and perhaps even more drastic) actions to protest against the GST and the Malaysian government?
We’ll definitely be keeping our eyes peeled for any updates.