Recently on 16th of July, our Finance Minister, Lim Guan Eng reintroduced the Sales and Service Tax ( SST ) and this will see the rate of 10% for sales and 6% for services. The Bill on SST will also be passed sometime in August.
Over the last few years, GST has received quite a bit of criticism and there are so many opinions by the public exclaiming that GST has caused an increase in prices of goods and services in Malaysia and hence, not being able to see any significant benefit from the excess tax revenues collected.
For businesses, the implementation of GST will cause the the claims back on tax to be difficult and requires a minimum of RM500,000 in annual sales before you it is deemed claimable. Furthermore, middlemen would also see this as an advantage to raise prices and use tax as one of the reasons to get more money.
While SST will result in a drop in tax revenue, SST have always been viewed as a less progressive form of tax and that is why many countries have moved on to GST. With the introduction of SST, many experts have said that prices should come down but however, be warned of the mixed reactions from the reintroduction.
The Difference Between SST and GST
Depending on the SST coverage, consumers could be paying the same or slightly more for certain items. tax burden will also be reduced and there will be an overall increase in disposable income for consumers. The price of an item will also vary by income groups and also the goods that will be consumed, depending on the types of goods and services.
You may watch a brief video explanation about SST and GST by clicking HERE
Abolishment of GST
There is still plenty of confusion between these two systems as our new Pakatan Harapan government carries out its promise to abolish the Goods and Services Tax ( GST) and reintroduce the Sales and Service Tax ( SST ).
As we all know, GST will be reduced to 0%, while many of you are happy over the abolishment of GST, This is because with all tax policies, the abolishment of GST is dependent on our parliament repealing the GST Act of 2014 before it can be abolished.
The answer to this debate and comparison isn’t so straightforward, it all depends on a number of factors such as:
- How many levels there are in the product supply chain between manufacturer and consumer.
- Different products and services are affected differently; top-up cards, cars, mobile phones food items.
- Prevailing tax exemptions for businesses.
As Malaysians, we can only expect prices of goods and services to adjust differently based on the type of good or service, and that there is no actual certainty or predicted outcome that can be expected from this change. The only thing to do is to wait for the new rates our government will set for the upcoming SST, and determine which items will and will not be affected.