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Wednesday, October 23, 2013

Cheaper prices, services with GST

Posted on 23 October 2013 - 05:40am

KUALA LUMPUR (Oct 23, 2013): Malaysians can enjoy cheaper goods and services for many basic necessities if the government implements the goods and services tax (GST), replacing the existing sales and services tax (SST), said Finance Ministry Secretary-General Tan Sri Dr Mohamad Irwan Serigar Abdullah.

The GST, likely to be implemented by 2015, will see a proposed rate of 4% to replace the current narrowly-applied 10% sales tax and 5% services tax.

The GST will be levied on the consumption of goods and services at all stages of the supply chain.

If implemented, some 40 basic food necessities, including rice, sugar, milk powder and flour will be listed as
zero-tax items, while essential services, such as healthcare, may be classified as tax-exempt.

Most of the items are currently being taxed under the SST and the transition to GST can ease burden on the poor.
The GST will ensure that the prices of these items will not increase.

Besides that, not all products will be charged the full tax under the proposed GST as certain products will be charged only half the GST rate.

"The GST is a must, it's not an option," Irwan Serigar said, adding that should the new tax regime be implemented, the government is confident of trimming the fiscal deficit of gross domestic product by 2015 and hitting a surplus by 2020.

Meanwhile, MIDF Amanah Investment Bank Bhd senior vice-president/head of Research, Zulkifli Hamzah, said although the implementation of GST is inflationary, it will only be in the short term as consumption patterns adjust over time.

The Customs Department is of the view that GST's inflationary impact will be minimal as basic and essential foodstuff will be zero-rated and public amenities will be exempted.

Another factor is the lower production cost as GST paid on inputs is claimable by businesses, while savings from the input tax credits should be passed on to the consumers in the form of lower prices.

GST, a broad-based consumption tax, or value-added tax, was first tabled in the Dewan Rakyat on Dec 16, 2009 but was withdrawn last year for amendments.

It is anticipated that Prime Minister Datuk Seri Najib Abdul Razak will announced the GST in his Budget 2014 speech on Oct 25.

The GST will take 14 months to be implemented after it was announced. – Bernama

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