The health minister's claim that healthcare cost will not be impacted by the implementation of the Goods and Services Tax (GST) has drawn flak from an opposition parliamentarian.
In taking Dr S Subramaniam to task, DAP's Tony Pua (right) asked if the minister was "ignorant or lying."
Subramaniam had explained that healthcare was GST-exempt in general and that his ministry would be carrying out an in-depth study on the GST structure and issue a detailed list of services and health products that are exempted.
The minister also urged all quarters "not to make speculation on this to avoid confusing the people".
However, Pua said that Subramaniam should stop making misleading remarks instead.
"The health minister, and many other BN leaders are obviously either ignorant about what is meant by GST-exempt, or choose not to be truthful about it.
"The government's GST website has explained 'GST-exempt supplies' very clearly via the illustration," he said in a statement.
In essence, the Petaling Jaya Utara MP said a GST-exempt product or service only means that no GST would be imposed by the provider to the consumer.
However, he added, the provider of these products and services such as hospitals would still be required to pay GST for all products and services it purchases from its suppliers.
For example, Pua said a hospital currently purchases a drug from the medical supplier for RM50, and sells it to patients at RM55 for a 10 percent profit margin.
"After the implementation of the GST, the hospital will have to pay the medical supplier RM50 plus 6 percent GST, amounting to RM3. The cost to the hospital would hence increase to RM53.
"If the hospital is to maintain the price of the drug to the consumer, then the hospital will only be making a profit of RM2 or a 3.8 percent profit margin," he noted.
Minister must be 'day-dreaming'
Taking another swipe at the health minister, Pua said Subramaniam (right) must be "day-dreaming" to believe that Malaysian hospitals would be so magnanimous as to absorb all the GST-induced increase in cost and continue to provide its products and services to the public at existing prices, and suffering a severe squeeze in profitability.
The question, the DAP MP noted, was not about whether the prices of healthcare products and services would increase, but rather a question of how much it would increase.
"Assuming that the hospitals were extremely kind and decides only to pass on the increase in their cost in absolute terms to the patient, then the price of the drug sold will increase from RM55 previously to RM58, based on the above example.
"The increase in RM3 is the amount of GST paid by the hospital to the government, and hence the hospital is only reclaiming its actual increase in cost. At RM58, that will already result in a 5.5 percent increase in healthcare cost to the consumer," he said.
"However, most hospitals as well as businesses will price their products and services based on a profit margin on their cost. In the above example, the margin is 10 percent. If the hospital intends to maintain the 10 percent margin, then they will charge the patient RM53 plus a 10 percent markup or RM5.30.
"The final price payable by the customer will hence be RM58.30. Compared to the RM55, this will still mean a full increase of 6 percent to the end-user or equivalent to the GST charge,” he added.
Finally, Pua said it would be completely plausible for the hospitals to decide to round-up prices of goods and services sold to the consumers.
In the above example, he said, instead of selling the drug for RM58.30, they could round up the amount to sell it for RM59 instead.
"The impact will be an increase of 7.3 percent in price compared to the pre-GST price. It is a practical impossibility for the government to control post-GST prices of goods and services in hospitals just as there is no way of controlling the varying prices at different hospitals today," he added.
In taking Dr S Subramaniam to task, DAP's Tony Pua (right) asked if the minister was "ignorant or lying."Subramaniam had explained that healthcare was GST-exempt in general and that his ministry would be carrying out an in-depth study on the GST structure and issue a detailed list of services and health products that are exempted.
The minister also urged all quarters "not to make speculation on this to avoid confusing the people".
However, Pua said that Subramaniam should stop making misleading remarks instead.
"The health minister, and many other BN leaders are obviously either ignorant about what is meant by GST-exempt, or choose not to be truthful about it.
"The government's GST website has explained 'GST-exempt supplies' very clearly via the illustration," he said in a statement.In essence, the Petaling Jaya Utara MP said a GST-exempt product or service only means that no GST would be imposed by the provider to the consumer.
However, he added, the provider of these products and services such as hospitals would still be required to pay GST for all products and services it purchases from its suppliers.
For example, Pua said a hospital currently purchases a drug from the medical supplier for RM50, and sells it to patients at RM55 for a 10 percent profit margin.
"After the implementation of the GST, the hospital will have to pay the medical supplier RM50 plus 6 percent GST, amounting to RM3. The cost to the hospital would hence increase to RM53.
"If the hospital is to maintain the price of the drug to the consumer, then the hospital will only be making a profit of RM2 or a 3.8 percent profit margin," he noted.
Minister must be 'day-dreaming'
Taking another swipe at the health minister, Pua said Subramaniam (right) must be "day-dreaming" to believe that Malaysian hospitals would be so magnanimous as to absorb all the GST-induced increase in cost and continue to provide its products and services to the public at existing prices, and suffering a severe squeeze in profitability.The question, the DAP MP noted, was not about whether the prices of healthcare products and services would increase, but rather a question of how much it would increase.
"Assuming that the hospitals were extremely kind and decides only to pass on the increase in their cost in absolute terms to the patient, then the price of the drug sold will increase from RM55 previously to RM58, based on the above example.
"The increase in RM3 is the amount of GST paid by the hospital to the government, and hence the hospital is only reclaiming its actual increase in cost. At RM58, that will already result in a 5.5 percent increase in healthcare cost to the consumer," he said.
"However, most hospitals as well as businesses will price their products and services based on a profit margin on their cost. In the above example, the margin is 10 percent. If the hospital intends to maintain the 10 percent margin, then they will charge the patient RM53 plus a 10 percent markup or RM5.30.
"The final price payable by the customer will hence be RM58.30. Compared to the RM55, this will still mean a full increase of 6 percent to the end-user or equivalent to the GST charge,” he added.
Finally, Pua said it would be completely plausible for the hospitals to decide to round-up prices of goods and services sold to the consumers.
In the above example, he said, instead of selling the drug for RM58.30, they could round up the amount to sell it for RM59 instead.
"The impact will be an increase of 7.3 percent in price compared to the pre-GST price. It is a practical impossibility for the government to control post-GST prices of goods and services in hospitals just as there is no way of controlling the varying prices at different hospitals today," he added.
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