Higher purchasing power for consumers under SST - analysts

The sales and services tax (SST), set to take effect on Sept 1, is poised to be beneficial for the people as it will enable them to cope with the cost of living better.

This single-stage tax is only imposed on manufacturers whereas the six per cent goods and services tax (GST), which was introduced in April 2015 and zero-rated on June 1 this year, was a multi-stage tax payable by all parties in the supply chain.

Also, SST is only taxable on 38 percent of the consumer price index basket of goods and services, compared with GST which covered 60 percent.

Among the food items to be exempted from SST are sardines, milk, coffee, tea and chilli sauce.

The Finance Ministry has given its assurance that the implementation of an improved version of SST would lead to RM23 billion in taxes collected being ‘returned’ to the people, thus helping them to ease their financial burden.

Enhances purchasing power

Kuala Lumpur International Chamber of Commerce advisor Sharifuddin Musa, who is also FM Plastic Industries Sdn Bhd chairperson, said the implementation of SST would increase the purchasing power of consumers which, in turn, would boost the nation's economy.

Acknowledging that the tax would have an impact on manufacturers, he said it was, however, not an issue as consumers, particularly those in the medium- and low-income brackets, were set to reap the benefits.

"When GST was enforced everybody, regardless of whether they were poor or rich, had to pay the six percent tax if they purchased goods on which GST was imposed. Due to this, people were reluctant to spend their money. But after this (reintroduction of SST), their purchasing power will increase because they no longer have to pay more (for goods)," he told Bernama.

He also noted that the government was maintaining the SST at six percent for the services tax and 10 percent for the sales tax.

"The only thing that is uncertain is how it will be calculated as it may be different," said Sharifuddin, who hoped that the SST would not be imposed on all industries.

"I hope the government will consider exempting small and medium-sized enterprises, and perhaps Bumiputera companies, from SST."

He is confident that the implementation of SST would help to stimulate the services industry, such as hotels and express bus and taxi services, due to the potential savings to be made by the operators concerned.

Improves enforcement

Meanwhile, former Universiti Utara Malaysia international business management lecturer Prof Mohamad Hanapi Mohamad said under the GST regime, the tax as well as profit margin were imposed at every level of the supply chain, starting from the manufacturer to the wholesaler and retailer and finally the end-user (consumer).

He said if the supply chain had many more levels the consumer would end up being burdened as they would be forced to pay higher prices for goods on which GST is imposed.

Whilst expressing support for the reintroduction of SST, he said the government should, however, monitor the business community and step up its enforcement activities to make sure that traders did not take advantage of the situation by hiking up prices indiscriminately.

"It will be worrying if prices are raised not due to SST but because of the action of some sellers who will try to shift the tax burden to the end-users (buyers).

"In the implementation of this tax system, there is the element of input, processes and output. It's important to monitor how the inputs and processes take effect to avoid any leakage. If the authorities can oversee this matter effectively, the SST will certainly bring more benefits than GST," he explained.

Mohamad Hanapi, who is also a member of the board of directors of Picoms International University College, said the Pakatan Harapan government's thrust on transparency and integrity would also be a plus point for the effective implementation of SST.

Stop the blame game

Federation of Malaysian Consumers Associations (FOMCA) advisor  Prof Mohd Hamdan Adnan expects the prices of goods to decrease after SST is implemented but said there were many other factors which the authorities have to pay attention to.

Apart from carrying out effective enforcement, the government should try to prevent the business community from playing the blame game.

"Usually, the retailers will blame the middle-man who, in turn, will blame the manufacturer (for any price increase)... this is often the reason (they give) for price hikes.

"We want all the parties involved to charge reasonable prices. We don't want the retailers to incur losses, neither do we want consumers to suffer. Hence, the government should find the best formula (to check the rising prices of goods) as many factors are involved... the authorities concerned should also carry out regular checks," he added.

-- Bernama