Malaysia's GST kicks in amid teething problems

By Asrul Hadi Abdullah Sani, Malaysia Correspondent In Kuala Lumpur, The Straits Times, 2 Apr 2015

PRIME Minister Najib Razak went shopping at a local supermarket to see how Malaysians are taking to the switch to a 6 per cent goods and services tax (GST) that kicked in yesterday.

There has been some confusion among consumers and businesses over which goods are subject to GST and which are not.

Some 4,000 officers from the Customs Department and the Domestic Trade and Consumer Affairs Ministry were sent out to ensure that retailers and traders complied with the new tax regime on its first day yesterday, according to Customs GST director Subromaniam Tholasy.

The GST was implemented after a nearly two- decade delay.

Set at 6 per cent - the lowest among ASEAN countries that have GST - it is aimed at making taxes fairer and more transparent, given that only an estimated 1.7 million Malaysians out of a workforce of 12 million pay income tax.

Finance Ministry figures show that in 2012, only about 2.2 million salaried workers out of more than 13 million paid tax. At the same time, only 15.6 per cent of more than one million firms registered with the Companies Commission of Malaysia to pay tax.

Datuk Seri Najib, who is facing pressure from his own party to reverse the GST, yesterday called on Muslims in the country to embrace the new tax reform.

"It's confirmed by our fatwa (religious edict). The National Fatwa Council has said that GST is halal… It is to ensure a more efficient taxation system that is also effective, transparent, easy to use and which will contribute to ensuring that Malaysia achieves its goal of being a high-income nation by 2020," he said in his keynote address at the World Halal Summit here yesterday morning.

Still, the long lists of GST-exempt and zero-rated items have caused teething problems. Officials said the GST hotline received more than 400 calls yesterday.

While consumers rushed to stock up on non-perishable goods in the run-up to the implementation of GST, businesses have been griping over the anticipated paperwork. Some small retailers, fearful of onerous tax-filing demands, have even chosen to close for good.

Some retailers have sought to cushion the impact of GST on customers.

Eight Ounce Coffee in Suria KLCC suspended its service charge temporarily, although it raised the prices of cold drinks slightly.

Dr Yeah Kim Leng, an economist, believes the GST's negative impact on growth will not be too great.

"There will be some inflationary impact in terms of higher prices as businesses will have to pass on the GST, especially for items that are not taxable," said Dr Yeah, who is also dean of the School of Business at the Malaysia University of Science and Tech- nology.

"We initially expected a large price increase but it has been lower than expected."

What appeared to cause the most confusion yesterday was the 6 per cent increase in prepaid phone card top-ups. About 30 million mobile phones use prepaid cards.

The Consumer Affairs Ministry said it would investigate.

Additional reporting by Shannon Teoh

Most shoppers take GST impact in their stride
By Melissa Lin, The Straits Times, 2 Apr 2015

TWO major supermarkets in Johor Baru were noticeably less crowded yesterday, when Malaysia's 6 per cent goods and services tax (GST) kicked in.

The Straits Times had seen a lot more shoppers at the same supermarkets just the day before.

The prices of most products at the supermarkets, including shampoo, toilet rolls and cosmetics, have risen. But some items popular with Singaporean shoppers, such as milk powder, cooking oil and baby diapers, still cost the same.

At the Aeon supermarket in Bukit Indah, a pack of 10 rolls of Kleenex ultra soft toilet paper costs RM19.50 (S$7.20), up from RM17.90 the day before. The price of a 2.4kg pack of Enfagrow A+ Step 3 Original milk formula remains unchanged at RM159.99 at the same supermarket.

Staff were seen restocking the shelves and putting up new tags indicating the prices inclusive of GST yesterday afternoon.

Unlike the day before, when shoppers were busily filling their trolleys with bottles of ketchup and packs of diapers, the mood was more relaxed yesterday.

"To be honest, I don't really care much," said a 60-year-old Malaysian manager who gave his name only as Mr Weng. His shopping basket was empty as he scanned the new price tags.

"Prices of imported products were already going up before the GST kicked in because the ringgit has depreciated a lot," he said. "A crate of apples already cost RM8 to RM9 more."

Some, however, were confused by the prices as certain items were part of an in-store promotion and cheaper than what their tags indicated.

Several shoppers were seen scanning their items on machines which showed the updated prices.

Singaporean housewife Lilian Choong, 60, who stocked up on noodles, bread and instant oatmeal at Aeon, said: "I know the prices of daily essentials are supposed to be unchanged. But even if they increase, the items are still cheaper than in Singapore."

At Tesco supermarket, also in Bukit Indah, updated price tags were in place when The Straits Times visited before noon.

Receipts showed the total price before GST and the tax amount.

"The prices I've seen so far are quite reasonable," said Ms Siti Khatijah, 25, a Malaysian customer service engineer who was buying a packet of milk.

But she is "worried that some retailers will take advantage of people who don't understand the GST and simply increase prices".