Manufacturers: Keep GST at 6pc for 5 years to limit cost fallout

BY JOSEPH SIPALAN

FEBRUARY 20, 2014

Vice president Federation of Malaysian Manufacturer (FMM)
Raja Dato' Abd Aziz bin Raja Muda Musa said today that the Goods
and Services Tax (GST) should not be raised above 6 per cent mark
for the first five years to help small businesses cope with the
impact of the new tax. — Picture by Saw Siow Feng

KUALA LUMPUR, Feb 20 — The Goods and Services Tax (GST) should not be raised above 6 per cent mark for the first five years to help small businesses cope with the impact of the new tax, the Federation of Malaysian Manufacturers (FMM) urged Putrajaya today.

FMM vice-president Datuk Abd Aziz Raja Muda Musa said there are numerous cost implications that will weigh down on the industry, especially on the small and medium enterprises (SME), when the new consumption tax rolls out in April next year.

“We would like the government to implement a moratorium on the 6 per cent, for maybe five or six years... don’t be in a hurry to raise it,” he said when presenting the private sector’s position on the new tax structure at a GST forum here.

The federal government has argued that it is a necessary measure that would eventually lead to lower taxes and make it cheaper to do business all around.

Critics of the new tax scheme have panned the Najib administration’s timing to introduce the new tax, noting that Malaysians — many of who fall under the lower income bracket — are not ready to deal with a broadening of the country’s tax base in the face of rising cost of living.

Abd Aziz today said manufacturers here would have little choice but to invest time and money into revamping their organisations to handle the new tax structure, especially in training staff and securing or upgrading to new software tailor-made for their many different sectors.

“There are over 200,000 manufacturing SMEs, and they only have one year to get ready... the impact of the GST in the value chain will go all the way.

“If there are any cost impacts, it should be as minimal as possible. The system should be effective and it must achieve its targets. Only if the promises are met, then it can be effective and not the other way around,” he said.

Abd Aziz said the industry wants the government to open up the market for GST software vendors as wide as possible to encourage more competitive pricing and sector specialisation, apart from extending tax deductions and breaks for companies spending on preparing themselves for GST.

FMM also asked the authorities to provide a guidebook to help companies deal with the practical problems they may face in the GST rollout, and for an assurance that GST refunds would not be used to offset other tax-related issues such as penalties. 

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