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Zero GST in Malaysia: Over 1 month on, who are the winners and losers?

KUALA LUMPUR — It has been more than a month since the new Malaysian government cut the rate of the Goods and Services Tax (GST) to zero nationwide. How has this new policy, a key campaign promise of the Pakatan Harapan coalition, affected businesses and consumers? Here's a breakdown of those who benefited the most, and those who somehow missed the benefits.

Not everyone’s a winner since Malaysia reduced its GST to zero per cent on June 1.

Not everyone’s a winner since Malaysia reduced its GST to zero per cent on June 1.

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KUALA LUMPUR — It has been more than a month since the new Malaysian government cut the rate of the Goods and Services Tax (GST) to zero nationwide.

How has this new policy, a key campaign promise of the Pakatan Harapan coalition, affected businesses and consumers? Here's a breakdown of those who benefited the most, and those who somehow missed the benefits:

THE BIG WINNER: CAR DEALERS

Datuk Aishah Ahmad, president of Malaysian Automotive Association, said that the orders received by the association’s members for cars have been “tremendous” after the GST was zero-rated.

“Definitely more than usual,” she said of the orders, noting that the actual figures for car sales in June are currently not available yet.

“Members indicate that sales and orders are very good and they are depleting their stocks,” she said, before adding: “A lot of members have run out of stock."

She said that many people are taking advantage of the three-month tax holiday that started June 1, to “buy forward”, ahead of the return of the Sales and Services Tax (SST) anticipated to roll in on September 1.

The trend of higher car sales is expected to continue in July and possibly in August, she added, although this would depend on whether car dealers still have enough stock or whether they have sold out.

Based on online reports of car prices with and without GST, the difference that Malaysians can keep as savings for their purchases of four-wheeled vehicles range from as low as a few thousand ringgit to even up to almost RM88,000, depending on the company and model.

For example, carmaker Proton recorded a 50 per cent jump in sales or 6,173 more units sold for June as compared to May, with last month’s sales also the best sales month so far for the entire year.

Ms Aishah said the SST’s implementation in September is expected to impact car sales, also noting: “September, we foresee there will be a dip in sales because people buy forward.”

A MIXED BAG: RETAIL

But not everyone’s a winner.

Retail Group Malaysia managing director Tan Hai Hsin, whose reports are based on surveys of Malaysia Retailers Association members, said the zero-rated GST did help to improve retail sales but said this depended on the type of businesses.

“For the month of June 2018, increase in sales varied among retailers. Hari Raya festival (also school holiday, World Cup, Father’s Day and Raya bonuses) helped to push sales as well,” he said.

“Some retailers enjoyed 30 per cent increase in business, while others only 10 per cent. Some did not see improvement in sales,” he noted, adding that the varied result in improved sales also depended on the additional discounts offered by retailers on top of the shaving off of 6 per cent GST on prices.

Businesses that enjoyed higher sales were those selling high value-added retail goods (such as cars, luxury items, electrical goods, electronics goods, gadgets and furniture) and those offering high value-added services (such as travel, house renovation, medical, beauty and hair care), Mr Tan said.

Retailers throughout Johor and not just its state capital Johor Baru also enjoyed higher numbers of Singapore tourists, who were drawn in by a stronger Singaporean dollar and the cheaper goods and services in Malaysia, he said.

Mr Tan said retailers who did not record a major increase in sales are provision shops, sundry shops and mini-markets, while those with no increase in business are small online retailers, hawkers, coffee shops, market stalls and other temporary stalls.

Datuk Seri Garry Chua, president of the Malaysia Retail Chain Association, similarly said the associations have received increased sales depending on the sector, with big-ticket items like cars and electrical goods, where more money can be saved, enjoying a bigger boost in sales.

“Some have recorded quite good increase in sales like 20 per cent and above. Like cars, there’s a big jump in car sales because of big amount in savings,” he said. “Some recorded as much as 50 per cent and even double sales depending on model."

Mr Chua added: "People are having a tax break so they are not so cautious like last time. Small items, I don’t think people will think so much, but generally they are not so restrictive in spending.

“Food items, there’s also a general increase but not so much, probably 10 per cent like food and beverages. In fact some of the restaurants, [during] GST, they did not increase prices at all, they absorbed it.”

YES FOR SHOPPING MALLS?

Mr HC Chan, advisor of Malaysia Shopping Malls Association, said the final industry data for June is not available yet, but said data on the increased number of visitors to Sunway Pyramid could offer an insight on malls’ performance in one month without GST.

“Our initial data indicated that month-on-month sales turnover between May and June 2018 was up over 30 per cent. Correspondingly the same period last year only registered 18 per cent. This represents an almost two-fold increase,” the Sunway Malls and Theme Parks CEO told Malay Mail.

During the same corresponding period, footfall or the number of visitors to the mall also went up by 13 per cent, which Mr Chan said was driven by the rise of ride-hailing services coupled with the steady number of car count or cars entering the mall’s carparks.

But Mr Chan said the zero GST was not the sole factor that had driven up June’s growth figures, citing other factors such as the festive period that traditionally acts as a catalyst for retailers and malls.

There was also a release of “pent-up demand” after the 14th general elections, as consumers started focusing again on spending after a prolonged “wait and see” pre-election period, he said.

LIFE GOES ON: RESTAURANTS

Mr C. Krishnan, vice-president of Malaysian Indian Restaurant Owners’ Association, said the zero-rating of GST is not going to make much of a difference in restaurants’ operating costs.

He pointed out that restaurant operators had been absorbing an estimated 10 per cent to 30 per cent of costs in the last three years after GST was introduced, attributing the higher costs to various factors such as pricier imported ingredients due to a weak ringgit, fuel costs and electricity.

“I think it’s not right to blame only the GST. People get so much dissatisfaction because too many things at one go,” he said, citing as example fuel price fluctuations.

The biggest benefit is actually in improved ties between restaurant operators and customers just by shaving off 6 per cent from food prices, he said.

“So our customers are quite happy, so they are very happy patronising our restaurants. I wouldn’t say within the one month, business has increased, but it’s just the small things really bothering customers, now it’s a relief,” he said.

He noted that most of his members’ customers are from the lower-income or mid-income group who regularly visit to catch a simple meal before or after work, saying that they had different price expectations as compared to when they visit other type of eateries.

Mr Krishnan added: "If you are going to much bigger restaurants, franchise or fast food, I think most of them don’t care how much the bill comes up, we are ready to pay, even 10 per cent service charge even before GST came. We are already prepared to go and pay that amount.

“Whereas we expect common restaurants to not be burdened by these levies and taxes, so now I think the buying power is slightly increased."

CONSUMERS

While the zero-rating of GST may not amount to much savings for small items, Malaysians still get to save a lot with the tax break.

Federation of Malaysian Consumers Associations deputy president Mohd Yusof Abdul Rahman said the federation had received many unofficial complaints from Malaysian consumers who were disappointed that prices only fell to pre-GST levels and did not drop further.

“However consumers still save a lot because GST is not only imposed on goods, but also on services, and most of the services that we use now don’t have the 6 per cent GST,” he said, having noted that zero GST actually only means that goods prices will be less 6 per cent of the tax and does not necessarily have to be lower. MALAY MAIL

BACKGROUND: MALAYSIA 'ZERO-RATES' GST

Malaysia introduced the GST  on April 1, 2015 at a rate of 6 per. It replaced the previous Sales and Services Tax (SST), which was at 10 per cent.

After winning Malaysia's watershed election on May 9, the Pakatan Harapan made good on its pledge to abolish the GST. The new government announced on May 16 that the GST would be reduced to zero per cent, with effect from June 1.

The SST is set to be re-introduced in September this year to replace GST.

The previous Barisan Nasional government said it had collected an average of RM42 billion (S$14.2 billion) annually in GST ever since the tax came into effect in 2015.

In contrast, the SST will only be able to collect an average of RM4 billion a year, said Finance Minister Lim Guan Eng in late May.

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