Malaysia has abolished the GST that was implemented more than 3 years since 1 April 2015 and reintroduced the Sales and Service Tax (SST) or we call it SST 2.0. effective on 1 September 2018. SST is not new to Malaysia as before implementing the GST, Malaysia had exercised SST.
SST 2.0 is almost follow back the old SST model and there are only a few differences between the 2 models which are as below:-
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Threshold for registration
The threshold for mandatory registration for SST 2.0 has been standardised to be RM500,000 turnover in 12 months (except for restaurant (threshold is RM1,500,000) and Customs Agent (threshold is Nil)). Under the old SST, the threshold for sales tax was RM100,000 and for service tax were having few categories of threshold like for professional services was nil threshold, for other taxable services were RM150,000 and for restaurant that were outside hotel the threshold was RM3,000,000.
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Exemption facilities under SST 2.0
The SST 2.0 has widened the tax exemption net to cover more goods compare to the old SST and GST which intended to relieve the cost of living of the community. According to the Ministry of Finance, under GST time around 60% of the goods in the Consumer Price Index basket were taxable but under SST 2.0 only 38% of the goods are taxable.
Other than the exemption on goods, under SST 2.0 for those registered manufacturers who purchasing materials or components from another registered manufacturer or via importation, they can apply for exemption online and some types of approval can be automatically obtained via online. This has reduced some red tapes of the procedures compared to the old SST that had to apply manually and to do reporting on a regular basis.
Impacts on pricing
The main concerns of the peoples on SST 2.0 should be the impacts on pricing, will it really benefit to peoples and they will have saving. Based on the forecast earlier the budget for GST collection for year 2018 supposed to be RM4.3 billions but now GST has been abolished and SST 2.0 has been implemented and Ministry of Finance has forecasted that the SST 2.0 revenue will be around RM2.3 billion. The figures hinted that the amount of the reduction which is about RM2 billions will be back to the consumers’ pocket. Of course there are other factors will affect the pricing of the goods:-
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Ethic of the businesses
When Government has changed any consumption tax policy or any price increase on petrol, sugars etc. There would be some unethical businesses tried to take advantage by simply increasing their price. This will be challenging the effectiveness of the enforcement of Price Control and Anti-Profiteering Regulation 2018 by Ministry of Domestic Trade, Co-Operation And Consumerism
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The length of the supply chain of the particular product
SST 2.0 is a single level tax system with narrow scope whereas GST is a multi-level tax system with wide scope. If the length of the supply chain of a product is long, the pricing will be lower under SST as it will having saving on the tax on the value added of other levels.
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The effectiveness and efficiency of the tax authority
This factor will indirectly affect the costing to the business and the additional cost will be passed on to consumers. During GST time, the mechanism is self-monitor where the taxable persons can offset output tax against the input tax credit, any excess in input tax credit would be refund by Government. This has made some issues on the refunds were delayed and now made known to the public that around RM18 billions refunds are owing to businesses. If there funds were refunded to businesses, they might reinvest it into the business and reducing the cost of financing. These might increase the cost of doing business.
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