GST will up prices even with sales tax gone

By Ong Kian Ming | 12:17PM Oct 27, 2013

MP SPEAKS The Barisan Nasional government is trying to mislead the rakyat by giving the impression that the price of most goods and the taxes paid by the consumer will be reduced after the introduction of the goods and services tax (GST) because it will replace two taxes – the sales tax and the service tax (SST) – which the consumer is currently paying for.

The truth is that the items taxed under the sales tax and the service tax are far less than what is taxed under the GST, which means that the prices of the majority of goods and services will increase because of the GST even after the removal of the SST.

What the BN has not told the rakyat is that many items are currently exempt under the sales tax. According to the Sales Tax (Rates of Tax No 2) 2012, the number of items which are exempt under the sales tax i.e. not taxed, runs to 250 pages. In contrast, the number of items which are zero rated under the GST – not taxed at any point of the supply chain – is only 21 pages long.

Some of the items which are not charged under the sales tax but will be charged under the GST include many non-luxury items such as milk, coffee, tea, mineral water, canned fruit, newspapers, stationary, school bags, and boxes, just to name a few. Electricity consumption above 200kwH (any amount above RM50) will also be charged GST.

The prices of these goods will definitely increase after the GST because the removal of the SST has no effect on their prices.

Currently the sales tax is restricted to certain restaurants and professional services provided by accountants, architects, motor vehicle service and repair centres, telecommunication services, security services, estate agents, parking space services operators and service firms.

More services will be charged GST

Under the GST, it is possible that services such as that provided by certain tuition centres and hair saloons will be charged the GST.

The wider coverage under the GST means that more services will be charged the GST compared to the current service tax. This means that the prices of more services will increase.

The BN has also included some items to be tax exempt (as opposed to zero rated) under the GST such as residential properties, financial services, health care and transportation. What this means is that the end product sold is not taxed by the GST.

But the inputs used to produce these goods and services will still be taxed by the GST. For example, residential properties won’t be taxed by the GST but the construction materials used in the building of these residential properties will be covered by the GST.

What this means is that the prices of the goods and services which are tax exempt will also likely rise as a result of the GST.

Ultimately, the argument that the rakyat will be paying less tax under the GST compared to the SST is an empty lie. If this was the case, then why introduce the GST as a revenue raising measure in the first place?

How can the government say that tax collection under the GST will improve and at the same time say that the rakyat will pay less taxes? This is misleading and dishonest.

The truth is that the GST will increase prices of a majority of goods and services even after the removal of the SST and that the financial burden to the rakyat will be increased.
ONG KIAN MING is the member of parliament for Serdang.

  1. #1 by Bigjoe on Sunday, 27 October 2013 - 8:04 pm

    Its bloody LIE to say that GST will not effect the poor because its not imposed essential goods. Experience from other countries show this is not true.

    I only drink tea with milk without sugar. When they raised the price on the sugary drink, they also increase the price of other drinks simply because they can. GST will increase price across the board, some may lag but it all catches up simply because demand for goods are inter-related i.e., they are near or distance substitutes. Just because GST is not imposed on some goods does not mean those goods will not go up. When people demand more of goods without GST, the price of those goods goes up to.

    The sad part is that Najib and his think-they-are-so-smar UMNOputras BELIEVE what they say about GST and other price subsidies removal. They are freaking unbelievable MEDIOCRE for people who are suppose to do the difficult thinking for the people.

  2. #2 by pub on Monday, 28 October 2013 - 12:46 am

    GST can only be levied and charged if the business is registered under GST. A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold of Annual Sales of RM500,000. The annual threshold is fixed at RM500,000 to ensure that the small businesses are GST-free and are not required to bear the costs of registration (start-up cost and compliance cost) under the GST.Based on studies, it is estimated that about 78% of the total business establishments will not fall within the GST system. As such the consumers has the choice of making their purchases of basic needs from the businesses which do not charge the GST. Indirectly, the consumers especially the rakyat residing in the rural areas will not be burdened by the GST. Therefore, such businesses cannot charge and collect GST on the supply of goods and services made to their customers. Nevertheless, businesses can apply to be registered voluntarily.

  3. #3 by Noble House on Monday, 28 October 2013 - 4:08 am

    Based on the Household Expenditure Survey in 2010, household income/expenditure curve, and taking into account the exemption on essential items, they found that the highest earning households with an average monthly income of RM30,815 pay 1.56 per cent GSTI (GST as a percentage of income), while the lowest earning households with average monthly income of RM605 pay 2.62 per cent GSTI.

    Mid-level income households, those earning about RM2579 a month, pay 3.07 per cent GSTI. In other words, the poor and the middle-income households will be more heavily burdened than the rich with the GST.

    Sectors of the economy which were not covered under the Sales and Service Taxes (SST) may now be under the coverage of GST, as it is a broad based tax measure. Unless these things are zero-rated (ie GST is applicable, but at a 0% rate), prices of goods not previously covered under those 2 tax systems will now be affected by the broad based GST and cost more.

    Given the situation of our country where only 20 per cent of households are paying income tax and 80 per cent of households are receiving government handouts in the form of BR1M, coupled with a deeply entrenched and rampant culture of corruption in the government which costs the country tens of billions of ringgit in tax payers’ money, the GST will have a far reaching implication on the purchasing power of the low and middle income groups.

    The question here is what guarantee there is that the money raised from GST will be used to lessen the national deficits and not again lost to corruption?

  4. #4 by undertaker888 on Monday, 28 October 2013 - 8:01 am

    Let’s do a simple math on goods going from the manufacturer to the user. Let’s say there are 4 levels…ie manufacturer-wholesale-distributor-retail-user. A 100rm item by the time it reaches the user based on GST alone (not including profits) will be,
    100+(100×6% + 106×6% + 112.36×6% + 119.10×6%)= 126.25rm

    So this is like 26.25% tax by the time it reaches the user. And this is just cost of goods only, not including the profits added along the way.

    Wow, how do they come to the conclusion we are taxed less? Maybe they will ask us to tighten our belts again while they loosen theirs. The audit general is our witness.

    • #5 by pub on Wednesday, 30 October 2013 - 8:26 pm

      undertaker888 had forgotten to credit the input tax at each stage. Please understand how VAT or GST work before putting misleading opinion on the net.
      Using his example of no profit added along the way, the final price is still 100rm due input tax credit set-off.

  5. #6 by bangkoklane on Monday, 28 October 2013 - 12:00 pm

    Why make things so complicated? Easier to hide abuses? Keep things simple. Spend less, make every dollar of government spending count. Not to worry, as our government continues on its journey of self-destruction, all we have to do is wait. We do not even have to campaign. By the next GE bye-bye BUMNO/UMNO Baru/UMNOB-BN…

  6. #7 by Sallang on Tuesday, 11 February 2014 - 12:48 pm

    Apology. I do not know where to post this, as a community service.
    Please be informed that, if you ever visit Seremban, the parking meter have been adjusted such that, 30 sen is the minimum, in order to activate the meter.
    In the past, you can put 10sen for 10 minutes, 20sen for 20 mins. of parking. Now minimum is 30sen, when the meter is at ‘O’.
    So do not think the meter is out of order, and you are fine, because you will be fined!
    Actually, the town council has increase the parking charges to minimum 30sen.
    Its very unfair to the unknowing public, and visitors from outside Seremban.

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