Malaysia GST to SST - How Will This Affect You?

With the higher oil price paving the way for fiscal reforms, read on if you are wondering how the zero-rated GST and the return of SST will affect you.

It’s been a week since the GE14 elections and what a time it is indeed to be alive. One of the things that have been widely discussed is the return of the SST after a 3-year implementation of GST. First mentioned in the Pakatan Harapan (PH) manifesto, it was one of most memorable PH promises to voters, in which they will sought to replace the GST with SST within 100 days of winning the 14th General Election.

But in truth, what does this spell for consumers once the Goods Service Tax is rendered zero-rated and that the Sales and Service Tax has returned to the fore?

Will The Prices Of Goods Increase / Decrease After The Removal Of GST?

Perhaps one of the most commonly discussed worries among the people of Malaysia is whether the directive of making the Goods Service Tax zero-rated to pave away for the return of GST would play a role in increasing the price of goods.

This concern was raised by Edaran Tan Chong Motor (distributor and assembler of Malaysian Nissan vehicles) in which Christopher Tan, the company’s marketing director, stated that cars may be more expensive when the Sales and Services Tax (SST) is reintroduced. He also added that the industry could see higher car prices if the return of SST is based on the previous calculation formula in the Service Tax Regulations 1975.

Having said that, one needs to keep in mind that the original goal of the GST is that it is a value-added added tax that is used to replace all the indirect taxes levied on goods and services by the government. This aim of having a single, unified tax is to strengthen the economy while lowering the costs of business owners. More reasons for the implementation of the GST can be read at the official GST website and right now, you may be wondering, what has happened since the implementation of GST in Malaysia?

According to the Edge, the introduction of the goods-and-services tax in April 2015 caused a spike in inflation to 4.2 percent in early 2016, even after the allocation of handouts by the government for low- and middle-income residents to help offset the bigger tax bills. So yes, in theory it is expected that GST will be beneficial for consumers as the manufacturing costs is supposed to be absorbed by the producers.

Moving forward to 2018, with the Goods Service Tax nullified, Bank Negara Malaysia expects the prices of goods and services to drop. Bank Negara governor Muhammad Ibrahim said that it was important for the relevant authorities to ensure that businesses passed the benefits to the public at large. Aside from that, he also commented that the move will have an impact on inflation but it is too early to calculate the inflation rate at the moment.

“The inflation rate for the first quarter is set between 2% and 3%, but with the information coming in, we will look at it again. If need be, we will revise the rate”

To Conclude

So yes, while there are multiple opinions as to how rendering the GST zero-rated would affect the price of goods and services in general in Malaysia, what’s for certain is that The Malaysian economy, measured by the indicator gross domestic product (GDP), has grown by 5.4% year-on-year in the first quarter (1Q) of 2018, owing to the continued expansion in private sector activity and strong support from net exports, according to BNM.

With a stronger ringgit exchange rate in 2018, this translates to a possibility for increase in purchasing power among Malaysians. Still, it remains heavily debated in different social circles as to whether this zero-GST move would be able to support the Malaysia’s debt-to-GDP ratio of 50.8 % although the Finance Ministry has assured that the higher oil prices now will provide a buffer for the immediate future.

Still, it has only been one week since the change of governance took place. With new policies and the return of subsidies in place, it is only a matter of time before we start to witness the fascinating changes and transformation that the new Malaysia is experiencing. Need a crash course on what is Sales and Service Tax all about and how did it all happen? Don’t forget to check out our blog for all things related to GST, tax and of course, top financial tips that will help you get more for your money.

Have anything to say about the return of the Sales and Service Tax? Let us know in the comment section below.

0 comments

Agree or disagree with this post? Questions? You also have your word!

  • leon

    i would like to know whether the RM50 per year per credit card will be back to charge us or not.

    Reply
    • RinggitPlus

      Greetings, Leon

      It is a little early for us to determine the rate. What we do now is the SST will be introduced within a period of two months. That said, the rate may differ depending on the government's directive and Bank Negara's announcement. As such, we would advise you to wait for the government and Bank Negara's announcement on this matter.

      Thanks for the question and we hope this help.

      Reply
    • Yunus

      Looks like a "regressive " move by PH and believe this is a populist move done without proper basis.
      This move also backtracks what some of the group of eminent persons and key leaders including the current PM and a former Finance Minister were saying in the past i.e. supporting GST as way to go but unable to implement due to the political cost. Yes, the GST did come with a huge political cost to the coalition that lost in GE 14.
      Can so many nations that have implemented GST be wrong ? Why not the present government revisit and review the study the previous government did before they embarked on the GST. In fact one person on the group of eminent persons was very much a part of that study and advise the team accordingly without political bias.

      Reply
      • Ano

        Should I hold back on major purchases until next month?

        Reply
        • RinggitPlus

          Hi, Ano

          This part is a little complex for us to answer as this is on a case by case basis. Some vendors have taken an early step to absorb the 6% charges earlier than the effective date. So, check with your vendors and retailers. Who knows you might already be able to get a great deal.

          Thanks for the comment and we hope this help.

          Reply
        • Chris

          GST is supposed to avoid double taxation which translates to lower prices for the population and a more fair and transparent taxation structure. Almost every developed country has been practicing GST for years and they would not even consider going into our previous SST system as that was a messy and system. I am always wondering why do we blame the inflation totally on GST? There were many factors in the increase in inflation, i.e. someone we are waiting to be arrested. but in my opinion the increase in inflation after the implementation of GST was due to the mismanagement of the introduction of the GST system. The previous administration took the opportunity to line their pockets with the implementation of GST through their programs, etc etc. which translates to increase in cost of the implementation of GST to businesses which then translates to increase in inflation rate. If the GST system was implemented properly and explained to the population properly, more of the population would be supporting GST instead of opposing to it.

          I predict that when we revert back to SST the inflation is going to increase even more. Think of the businesses who disposed of their old accounting systems to change to the new GST system. Now the money they spent on the implementation is going down the drain. Not only that, they would have to change their wole accounting system again. Then theres the drop in government revenue, which weakens our currency and investors confidence in our country.

          If I am a foreign investor, I would not even think of investing in a country that cannot even decide on their taxation system and choosing a taxation system that is obsolete and inefficient. Instead of reverting to SST we should actually consider improving GST system to bring more benefits to our citizens. Enforcement of the GST system is also very important. Who has not been to a shop who tells u they will give u an additional discount if you do not need a receipt? What about those restaurants who charges an additonal 10% service charge on top of GST? I would love to hear a restaurant owner explain to me what is a service charge? Im paying for my food and the cost of your service should have been included in your price. If Im being charged for service, then my food should be free.

          Reply
          • Jenn M. Zen

            You are so RIGHT!!!!

            Reply
            • SM Tan

              Agree, why not improving the GST system instead of going back to SST? Thinking about SST is really a nightmare.

              Reply
            • Chris

              No. Why are we reverting to an ancient system which is messy and inefficient. GST is to avoid double taxation. And why do we blame inflation and the economy solely on GST? There were many reasons of our problems today, i.e. someone we have been waiting to see in cuffs for the past few weeks. :)
              Reverting back to the previous system would be a waste of our limited resources. Money have been spent on the implementation of GST and now we want to throw the system away? Thats a stupid thing to do. Why are we not considering improving the GST system and increase the enforcement of the GST system? Who have not been to a shop which tells u they will give u an additional discount if you dont require a receipt. What about those restaurants which charges 10% service charge on top of GST? I would love to hear a restaurant owner explain what is a service charge? The service should have been included in your menu prices? So if you charge me for service why am i paying for my food? I predict an inflation increase and an economic downturn if we revert back to the SST system.

              Reply
              • Aun Chuan

                Does the government need to table the SST Act in Parliament before it can be implemented?

                Reply
              • Viji

                What will happen to annual Insurance premium we paid a couple of month before they zeroed the GST in 1st June? Will we get a prorated GST returned?

                Reply
                • RinggitPlus

                  Hi, Viji

                  We understand where you are coming from, given that you have paid the annual insurance premium prior to the zerolisation of the GST. That said, you will not get the prorated GST returned to you.

                  In general, whenever you purchase any goods and services during the time when GST is implemented, you pay the exact price as stated during that time. As long as the time of the payment is settled still during the implementation of the GST, you will not get the GST refund back, even if it is one day before the zerolisation of the GST.

                  However, it is in your best interest to contact your respective insurers to get more clarification on this matter.

                  Thanks for the question and we hope this help.

                  Reply