The GST imposition that was and then wasn’t

It is and then it is not. In the minds and conversations of the public, it must be election year.

Just a short time after the announcement of a new Tourism Tax, the Customs Department issued the goods and services tax (GST) on 60 food items which includes seafood, vegetables, fruits, tea, coffee, noodles and spices.

Rousing fury from the public, the implementation that would have been effective 1 July (same time as the Tourism Tax) was rescinded. According to the director general Datuk Subromaniam Tholasy, the decision to hold off on the implementation came after the department consulted with the Finance Ministry, which the country’s Prime Minister Najib Razak chairs.

“The media was referring to the Goods and Services Tax (Zero Rated Supplies) Order 2017 which was gazetted on June 6 and will take effect on July 1. The Customs Department has referred this matter to the Finance Ministry for feedback and made the decision that this Order should be cancelled,” said Tholasy.

(Read also: Retailing in Malaysia is just so bad right nowMalaysia’s retail sales growth downgraded again)

The very unpopular GST was implemented in April 2015, driving many businesses to restructure their pricing plan and upgrade their accounting systems. The adaptation for SMEs in Malaysia, which accounts for over 99 per cent of all businesses in the country, to GST-enabled system has been anything but smooth.

According to KPMG in Singapore, head of indirect tax, Lam Kok Shang, many SMEs in Malaysia do not have the ability to implement the required GST-enabled solutions. Despite the government providing some financial support, “there remains a knowledge gap in respect to understanding how these system works.”

One year in, the tax has collected over RM54.8 billion (USD12.77 billion) in revenue.

(Read also: Malaysia’s retail: It’s up, it’s down, it’s going nowhere and everywhereMade in Malaysia to China, tax free by 2018MRCA calls for freeze on new malls)

Like with any major change, eventually, the people adapt. Confusion that stemmed from the beginning of the tax scheme has turned into melancholic acceptance. The GST is here to stay and so is inflated pricing. However, for businesses, the impact is less than ideal.

According to the Associated Chinese Chambers of Commerce and Industry of Malaysia’s president Datuk Michael Kang, the GST has made it hard for SMEs to cope, especially as the ringgit depreciates and issues with the imposed minimum wage for foreign workers cuts into profits.

“It has been especially acute over the last six months as consumers understand the price of goods is much higher and have cut down their spending significantly,” said Kang.

Associations have been at odd ends with the Customs Department. Recently, the Malaysia Association of Hotels (MAH) raged against the imposition of the Tourism Tax. Over to the east, Sabah and Sarawak are enforcing certain legislations that were agreed upon prior to joining Malaysia in order to reject the Tourism Tax Act 2017 from affecting their tourism trade.

If the GST was slapped onto the proposed 60 items, Malaysians will have to think twice before ordering that plate of char kuey teow or bihun goreng, as these staple carbs are part of the ‘noodles’ category.

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