Talk on "Impact of GST 6% to 0% and transition to SST for business and individuals" by Mr Tim Simpson, Tax Managing Consulting , PwC Malaysia

From left : Nor Sherriza binti Nor Rashidi, Mr Tim Simpson, Dr Tan Consilz, Dr. Brian Wong Kee Mun, Mr Bryan Chan. Token of appreciation to Mr Tim.
Mr Tim Simpson explaining on the Impact of GST 6% to 0% and transition to SST for business and individuals.  A full-house audience during the talk.

SHAH ALAM, 18TH JULY, 2018 -The Goods and Services Tax (GST) is a vast concept that simplifies the giant tax structure by supporting and enhancing the economic growth of a country. GST is a comprehensive tax levy on manufacturing, sale and consumption of goods and services at a national level. The Goods and Services Tax (GST) system which was implemented since 1 April 2015 is slated to be replaced by the Sales and Service Tax (SST) system. In the transition, the supply of goods and services in Malaysia will be subjected to GST at 0% instead of 6% with effect from 1 June 2018. It is anticipated that the GST system will be fully replaced by the Sales and Service Tax (SST) system eventually via reintroduction of new legislations on SST.

KDU School of Business organized a talk on the “Impact of GST 6% to 0% and transition to SST for business and individuals” by Mr Tim Simpson, the Tax Managing Consultant of PwC Malaysia. In his talk, he has covered two key components:
  • Tax implication on setting GST rate from 6% to 0% from the business and individual perspective
  • The transition impact from GST to SST effective September 2018 on business and individual”  

GST is deemed to be a factor to higher prices of goods and services after its implementation in 2015. In fact, prices had started rising even before the GST took effect as businesses took the opportunity to raise prices in anticipation of higher costs. Such marked increases were masked by a benign overall Consumer Price Index, which grew by just 2.6% in the same period. And as consumers grumbled about having to pay higher prices, some businesses implemented two types of charges to consumers — “with or without GST”. Now, with the zero-rated GST, as announced by the government, consumers are hoping that prices will start to decline in the near term.

Tim explained that until the SST is re-introduced in a revised structure, GST has been zero rated. This means that while businesses will still have to do the compliance work around the tax, Malaysian will enjoy on indirect tax holiday for the next one month. As a result, businesses will likely see an increase in the overall consumption from consumers looking to benefit from lower prices during this tax-free period.  

The implication of the talk towards the audiences is to understand the practicality of the tax system application and submission of tax returns to the tax authority before and after the GST rate revision, and after the setting up of the SST regime. Regardless of whether an individual to a retail, F&B or service-oriented business, there are some pricing adjustments should be taken into account. Perhaps one of the common doubts among Malaysians is whether the directive of making the GST zero-rated to pave way for the return of SST would play a role in increasing the price of goods. This was the concern raised by one of the vehicle assemblers and distributors in the car industry where based on the previous calculation formula in the Service Tax Regulation 1975, cars may be more expensive when the SST is reintroduced. Tim reminds the audiences that we need to keep in mind that the original goal of implementing GST is to replace the SST and to enhance the capability, effectiveness and transparency of tax administration and stabilized the government’s revenue.

In a nutshell, the consumers’ purchasing power may seems to increase during the tax holiday from June 2018 to August 2018, concluded Tim in his talk about the transition period from GST to SST. The talk was not only benefitting KDU School of Business students, but also the corporate participants from the Paramount Property and Education group of companies.