With a budget allocation of RM35 billion covering 40 initiatives, the PENJANA economic recovery plan is intended to stimulate various industries in the Malaysian economy. This includes the automotive sector, where the government will introduce the exemption of sales tax for passenger cars between 15 June to 31 December 2020 to boost new car sales:

• 100% sales tax exemption for the purchase of locally assembled cars (also referred to as completely knocked-down (CKD) cars)
• 50% sales tax exemption for the purchase of imported cars (also referred to as completely built-up (CBU) cars)

Currently, the sales tax for vehicles is set at 10% for both locally assembled and imported cars. With the exemption in place, it means that the sales tax is fully waived for locally assembled car, or charged at 5% for imported cars.

Sounds like a great bargain, but this does NOT mean you get a simple 10% discount off the retail price when you buy your new car (or 5% for imported cars). How much exactly do you save via the exemptions? Let’s break it down.

Sales tax exemption to the rescue

Data released by the Malaysian Automotive Association (MAA) showed that the automotive industry was struggling after the implementation of the movement control order (MCO) in mid-March 2020. The year-to-date total industry volume (TIV) recorded as of April 2020, for instance, amounted to only 106,601 vehicles – down 44.75% from 196,111 vehicles a year ago.

And if that’s not alarming enough, the monthly vehicle sales in April 2020 fell by a staggering 99.37% from the month before – from 22,478 units to only 141 units (131 passenger vehicle registrations, 10 commercial registrations). March itself, too, saw a 44% plunge in vehicle sales. These figures followed the downward trend that began at the start of 2020.

Given the severity of the situation, the government introduced the sales tax exemption as part of the PENJANA plan to boost the automotive sector.

Understanding the price structure of cars in Malaysia

As mentioned, the sales tax exemption does not translate to a direct 10% or 5% discount off the final retail price of the vehicle. To understand why, you need to refer to the pricing structure of a vehicle:

Government-approved selling price + 10% sales tax + Margins

NETT SELLING PRICE

+ Handling/Inspection fees/Accessories

RETAIL PRICE WITHOUT INSURANCE

+ Road tax + Insurance

FINAL RETAIL / ON-THE-ROAD (OTR) PRICE

(Source: Paul Tan’s Automotive News)

As you can see, the 10% sales tax is calculated based on the government-approved selling price. It is not charged on other subsequent costs, such as the margins, inspection fees, as well as road tax and insurance charges. As such, you’ll only get a rebate for the nett selling price, after which you will still have to pay 100% of all the other fees and costs.

What does this mean for you as a prospective car buyer? It means that the “discount” will not be as much as you expect it to be. You won’t get a 10% “discount” of RM10,000 for a locally assembled vehicle priced at RM100,000. Instead, the price is likely to drop only between 3% to 8% after the full sales tax exemption is implemented for locally assembled cars, and even lower for imported cars.

The sales tax exemption is fundamentally similar to the tax holiday that Malaysians enjoyed between June to August 2018, during which the goods and service tax (GST) was zero-rated from all vehicle prices. The move was made back then in anticipation of the re-implementation of the sales and services tax (SST).

Excise and import duties are not exempted

Aside from the sales tax, vehicles sold are also charged with other taxes, namely excise duty and import duty. At present, the excise duty is set at between 60% to 105% for both locally assembled and imported cars, and it is calculated based on the car model and engine capacity. Meanwhile, the import duty can go up to 30%, which varies based on the vehicle’s manufacturing country. For instance, import duty is not imposed on vehicles manufactured in Japan and ASEAN countries.

Note that these separate taxes are not exempted, and must still be paid where applicable. Combined with the 10% sales tax, tax charges for cars can come up to quite a substantial amount, making Malaysia one of the countries with the highest tax on cars globally. For instance, the total tax charges for a Toyota Vellfire could come up to about RM110,000 (before exemption), ballooning the on-the-road price to RM382,300 (2.5L model).

So how much exactly do you save? Here’s a before-and-after price list of popular cars in Malaysia

With the sales tax exemption officially beginning this week, automotive manufacturers and retailers have released the updated price for their models. Local vehicle manufacturer Proton, for instance, announced that the price of its vehicles will be reduced between 1.4% to 5.7% after the sales tax exemption. Perodua, meanwhile, had lowered its vehicle prices by 3% to 6% several days ahead of the official enforcement of the exemption.

Here’s a list of the revised prices for some of the popular cars in Malaysia for comparison:

Car model	Variant	Price before sales tax exemption	Price after sales tax exemption	Price difference
Proton Saga	1.3 Standard MT	RM32,800	RM32,400	-RM400 (-1.22%)
	1.3 Standard AT	RM35,800	RM35,300	-RM500 (-1.40%)
	1.3 Premium AT	RM39,800	RM39,300	-RM500 (-1.26%)
Proton Persona	1.6 Standard MT	RM42,600	RM42,100	-RM500 (-1.17%)
	1.6 Standard CVT	RM44,600	RM44,000	-RM600 (-1.35%)
	1.6 Executive CVT	RM49,600	RM48,900	-RM700 (-1.41%)
	1.6 Premium CVT	RM54,600	RM53,700	-RM900 (-1.65%)
Proton X70	1.8 TGDI Standard 2WD	RM94,800	RM89,900	-RM4,900 (-5.17%)
	1.8 TGDI Executive 2WD	RM106,800	RM101,000	-RM5,800 (-5.43%)
	1.8 TGDI Premium 2WD	RM119,800	RM113,100	-RM6,700 (-5.59%)
	1.8 TGDI Premium X 2WD	RM122,800	RM115,800	-RM7,000 (-5.70%)
Perodua Axia	1.0 E (MT)	RM24,090	RM23,367	-RM723 (-3.00%)
	1.0 G (AT)	RM33,490	RM32,485	-RM1,005 (-3.00%)
	1.0 GXtra (AT)	RM34,990	RM33,940	-RM1,050 (-3.00%)
	1.0 Style (AT)	RM38,890	RM37,515	-RM1,375 (-3.54%)
	1.0 SE (AT)	RM38,890	RM37,515	-RM1,375 (-3.54%)
	1.0 Advance (AT)	RM43,190	RM41,427	-RM1,763 (-4.08%)
Perodua Bezza	1.0 G (MT)	RM34,580	RM33,456	-RM1,124 (-3.25%)
	1.0 G (AT)	RM36,580	RM35,391	-RM1,189 (-3.25%)
	1.3 X (AT)	RM43,980	RM42,551	-RM1,429 (-3.25%)
	1.3 Advance (AT)	RM49,980	RM48,356	-RM1,624 (-3.25%)
Perodua Myvi	1.3 G (MT)	RM42,790	RM41,292	-RM1,498 (-3.50%)
	1.3 G (AT)	RM44,590	RM43,029	-RM1,561 (-3.50%)
	1.3 Premium X (AT)	RM46,590	RM44,959	-RM1,631 (-3.50%)
	1.5 High (AT)	RM50,290	RM48,530	-RM1,760 (-3.50%)
	1.5 Advance (AT)	RM54,090	RM52,197	-RM1,893 (-3.50%)
Honda City	1.5 S (Standard)	RM78,500	RM75,295.36	-RM3,204.64 (-4.08%)
	1.5 E (Standard)	RM84,600	RM80,978,91	-RM3,621.09 (-4.28%)
	1.5 V (Standard)	RM91,600	RM87,600.63	-RM3,999.37 (-4.37%)
Honda Civic	1.8 S (Standard)	RM113,600	RM109,326.51	-RM4,273.49 (-3.76%)
	1.5 TC (Standard)	RM129,600	RM125,081.09	-RM4,518.91 (-3.49%)
	1.5 TC-P (Standard)	RM139,600	RM134,661.28	-RM4,938.72 (-3.54%)
Honda HR-V	1.8 E (Standard)	RM108,800	RM104,000.21	-RM4,799.79 (-4.41%)
	1.8 V (Standard)	RM118,800	RM113,421.92	-RM5,378.08 (-4.53%)
	1.8 RS (Standard)	RM124,800	RM118,581.81	-RM6,218.19 (-4.98%)
Toyota Vios	1.5J	RM77,200	RM76,101	-RM1,099 (-1.42%)
	1.5E	RM81,200	RM80,074	-RM1,126 (-1.39%)
	1.5G	RM87,300	RM86,132	-RM1,168 (-1.34%)
Toyota Camry	2.5V	RM196,888	RM188,763	-RM8,125 (-4.13%)
Mazda CX-3	2.0 2WD	RM130,159	RM126,829	-RM3,330 (-2.56%)
Mazda CX-5	2.0 2WD Mid	RM137,269.20	RM132,403.80	-RM4,865.40 (-3.54%)
	2.0 2WD High	RM154,269.20	RM148,563.70	-RM5,705.50 (-3.70%)
	2.5 2WD High	RM167,660.40	RM161,103.50	-RM6,556.90 (-3.91%)
	2.2D 2WD High	RM173,122.80	RM167,274.70	-RM5,848.10 (-3.38%)
	2.5T AWD High	RM181,660.40	RM174,852.10	-RM6,808.30 (-3.75%)
BMW 7 Series	740Le xDrive	RM598,800	RM569,052.87	-RM29,747.13 (-4.97%)
BMW X6	xDrive40i M Sport	RM729,800	RM703,947.39	-RM25,852.61 (-3.54%)
Mercedes-Benz A-Class Sedan	A200 Progressive Line	RM229,888	RM222,121	-RM7,767 (-3.38%)
	A250 AMG Line	RM267,888	RM259,255	-RM8,633 (-3.22%)
	AMG A35	RM348,888	RM336,278	-RM12,610 (-3.61%)
Mercedes-Benz CLA	AMG CLA45S Edition 1	RM448,888	RM433,802	-RM15,086 (-3.36%)
Peugeot 3008	1.6 THP Active Plus	RM150,888	RM145,573.52	-RM5,314.48 (-3.52%)
	1.6 THP Allure Plus	RM163,888	RM158,236.66	-RM5,615.34 (-3.45%)
Peugeot 5008	1.6 THP Active Plus	RM166,888	RM160,808.60	-RM6,079.40 (-3.64%)
	1.6 THP Allure Plus	RM179,888	RM172,931.90	-RM6,956.10 (-3.87%)

(Source: Paul Tan’s Automotive News)

*****

Now that we’ve shed some light on this, it is clear that even though the initial announcement made caused plenty of excitement, the actual savings is actually not as generous as originally thought.

If you’ve been planning to get a car, this incentive by the Malaysian government will mean you enjoy some savings. But before you commit, do make sure to have a clear idea of your existing financial obligations and capacity before placing your booking. Plus, these discounts will continue until the end of the year, giving you plenty of time to decide. In these difficult times, financial prudence is crucial as we navigate the current challenging economy together.

• TAGS:
• Automotive Sector
• Car Sales Tax Exemption
• Cars
• Excise Duty
• Import Duty
• PENJANA
• PENJANA Economic Recovery Plan
• Sales Tax
• Tax Exemptions