GST for oranges, but not lobsters

A senior government officer admits to some unavoidable 'limitations' in the impending Goods & Services Tax (GST) but insists that it is a good for the country

KUALA LUMPUR: Luxury food items such as abalone, lobsters, and oysters will be exempted from the Goods & Services Tax( GST) while common fruits such as oranges will be taxed.

The above example is said to be “illogical” and “unfair”, given that the government’s intention for the proposed GST is to only make basic necessities tax free.

Customs deputy director GST special unit Wan Leng Whatt explained that such incidents are due to unavoidable “limitations”.

“These issues are difficult to answer and there are many more of such examples. Yes, it’s true that lobsters and even abalones and oysters are zero rated. Fruits are generally standard rated,” he said during a recent talk on GST.

Wan said while the government generally wanted to make all basic food “zero rated”, problems arose when certain items do not have a properly defined “code”.

“We wanted to zero rate basic food. We want people to be able to afford fish and prawn but at the same time we don’t have codings for lobsters, abalone, oysters [to differentiate item types]. These were simply the limitations,” he said.

However, other gourmet food such as shark’s fin and dried mushrooms are taxed as those items had codings, he noted.

As for fruits, Wan explained that the government initially intended to make local fruits — such as papaya, rambutams and mangosteen — zero rated as well but later decided against it.

“But the low income group doesn’t really eat these fruits. So now, generally all fruits will be taxed under GST.

“And when we talk about low income group, many of them actually have their own bananas, [so] they eat their own bananas, [and] they don’t have to buy. However, we pity those who are urban poor, they will be burdened in these aspects, I acknowledge that,” he added.

These issues were brought up by GST consultant Derek Wong during the GST talk held at the construction and hardware trade exhibition, OneBuild and OneWare 2012 here. It was jointly organised by One International Exhibition Sdn Bhd and Malaysian Hardware, Machinery & Building Materials Dealers’ Association.

Wong, a partner of GBS KAC Advsory Services and speaker during the talk, said that there are several instances where the GST seemed illogical, but agreed with Wan that the tax reform should be implemented to widen the country’s tax base.

Where to draw the line?

Wan also confirmed that palm oil, peanut oil, and coconut oil are not taxed but corn oil and sunflower oil would be. He explained that this was also due to the absence of coding for the latter two cooking oils.

Also highlighted was that medicine bought from a private hospital will be tax-free; and the same item in the pharmacy will cost more with GST.

“Generally we wanted to make medicines cheaper. But our problem is that the classification of medicine and food supplements cannot be clearly defined.

“For example, Glucosamine, I would take it as a food supplement but my friend takes it after the doctor prescribes it as a medicine for him. Tell me, how to draw the line?

“So we took a position that if you got it from the hospital, it would be without GST. But anyway, if you bought it in a pharmacy, it is still a lot cheaper sometimes, as hospitals have other service fees…” he added.

The GST was first mentioned during the 2005 Budget speech and it was supposed to be in place by 2007, but the GST Bill was only brought to Parliament in December 2009. A year later, its second reading was postponed.

Until today, the only best indication of its implementation date is “after the general election” and “when the time is right”, both said by Prime Minister Najib Tun Razak.