Goods and services tax- GST in Malaysia (Worth to have a quick look!!)

Pre GST:
Pre-GST spending rush, but not on “big-ticket” items. Mainly on “Department & General Stores”, “Electronics & Telecommunications Equipment”, “Jewelries, Watches & Cameras”, “Furniture & Furnishings”, “Apparels” and “Automotive” (e.g. car maintenance services; purchases of parts and accessories), not so much on “big ticket” items like passenger cars and properties.

Passenger car sales growth was +2.7% YoY in Feb 2015.Residential property loan growth in Feb 2015 was relatively unchanged at 13% YoY compared with 12.9% YoY in Jan 2015. In addition, the volume of property transactions in 1Q 2015 declined -4.6% YoY to 88,600 from 92,900 in 1Q 2014 and -6.2% QoQ from 94,500 in 4Q 2014.

In addition, indications are that the value of credit card spending surged further in Mar 2015 to 30%-35%. Malaysia's GDP and inflation rate forecasts of 4.5% and 3%-4% respectively. The pre-GST spending rush implies 1Q 2015 real GDP growth north of +5% YoY.

Post GST:
Mixed impact on prices of goods and services. This is due to the GST replaced Sales Tax and the Services Tax and it has standardrated, zero-rated and exempted items. In addition, there are promotions by some businesses & industries to mitigate the impact.

1. Lower car prices by up to -5% (simple average of -1%).

2. Higher prices of especially processed food and beverages, some of which rose by more than the 6% GST.

3. Some businesses/industries are absorbing GST to mitigate the impact namely in hypermarket operators, food and retail chains, and number forecasting operators (NFOs).

4. Public transport exempted from GST but fares are rising, beginning with taxis, with more coming. On 19 Mar 2015, the Land Public Transport Commission (SPAD) announced 20%-67% hikes in taxi fares for Klang Valley, Johor Bahru and Penang, citing rising operating costs as the main reason.

5. Fuel prices were raised on 1 Mar 2015 to MYR2.25/litre for RON97 and MYR1.95/litre for RON95 and diesel as crude oil prices rebounded.

There are also the post-GST issues causing uncertainties on prices e.g. “flipflopping” on the prices of telco’s (eg. Maxis, Digi, Celcom, U)prepaid reloads; “legality” of the 10% service charge at hotels & restaurants; prospect of more medicines and medical equipment as well as specialist fees being exempted from GST.

GST in other countries:-

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