Absorbing GST may be illegal, says minister over mobile prepaid cards fiasco

Communications and Multimedia Minister Datuk Ahmad Shabery Cheek speaks to press members during a press conference at Permatang Pauh today. Shabery says the ministry will have to check the law before forcing telecommunications companies to absorb the 6% goods and service tax (GST) as they did with the sales and services tax (SST). – The Malaysian Insider pic by Hasnoor Hussain, May 2 2015.

The communications and multimedia ministry will have to check the law before forcing telecommunications companies (telcos) to absorb the 6% goods and service tax (GST) as they did with the sales and services tax (SST) previously, minister Datuk Seri Ahmad Shabery Cheek said today.

This is because absorbing the consumption tax introduced a month ago can be considered illegal, as the law on the GST requires businesses with a taxable turnover of RM500,000 to register as tax collectors for the government.

A closer look at the law was one of the options being studied before coming to an agreement with the telcos and announcing a solution on the issue, Shabery told reporters at the Seberang Jaya community college media centre Permatang Pauh today.

Shabery said the decision by hypermarket chain, Mydin to absorb GST for the first three months before passing the tax onto consumers was considered to be in violation of the law.

"Mydin is deemed against the law because if they could absorb GST in the first few months, why not continue.

"That's why it is better to consult and appeal with them to consider several options that might work for both parties," he said.

He said options under consideration for mobile prepaid reload cards include student package deals which would benefit targeted and deserving groups instead of foreigners who did not contribute to the country's tax.

"Most prepaid users are foreigners. Locals tend to use postpaid services, therefore, scrapping GST off from top-up cards alone would not be fair to Malaysians.

He said it would take time for the discussions and technical aspects to be smoothened out, as it involved many dealers and agents in the sales chain for prepaid top up cards.

"Many agents have already purchased the top up vouchers at a certain rate and it is impossible to recall these in a day or two," he said.

Meetings with representatives from the telecommunication companies, Customs Department and the ministry in charge of domestic trade and consumerism would be held in the next few days before solutions can be presented to the cabinet, he added.

"I will also be going on television in the next few days to detail the options we are looking at," he said.

Confusion over the pricing of mobile prepaid cards following the implementation of GST has been one of the biggest problems to arise since the consumption tax was enforced on April 1.

The GST was supposed to have replaced the SST of the same amount for mobile prepaid reload cards, but lack of synchronisation between the telco industry and the government on how GST should be implemented led to complaints from consumers on the first day of the tax about higher priced reloads.

Since then there have been conflicting statements by deputy finance minister Datuk Ahmad Maslan and the Customs Department, leading Prime Minister Datuk Seri Najib Razak to instruct Shabery over Twitter to handle the matter.

“@shaberyc Pls take charge of the topup issue. Mulai skrg, sebarang pengumuman kpd rkyt hanya boleh dibuat oleh Menteri KKMM sahaja," Najib had tweeted at his official handle, @NajibRazak yesterday.

(@shaberyc Pls take charge of the topup issue. From now on, any announcement to the public can only be made by the Minister KKMM only.)

- TMI