This is the week which sees the much-talked-about Goods and Services Tax (GST) begin its implementation across Malaysia. Beginning 1 April, all goods and services that are not marked as zero-rated by the Government, will be subject to GST at six percent of the transaction price.
For certain items, and this includes cars, GST will replace the ten percent sales tax that is currently in force. We are often asked if vehicle prices will go up or down with the implementation of GST and the answer, we’re afraid, is far from straight forward.
First up, it is important to understand that the 10 percent sales tax and 6 percent GST are applied differently at different stages of the supply chain. Sales tax is charged when the distributor sells the vehicle to the dealer, who then marks up from that sum after which on-road costs are added. GST, on the other hand, is applied at every stage of the transaction, and although various parties of the supply chain can offset input tax versus output tax, net result to the consumer is that the 6 percent will be calculated against the vehicle’s on-the-road price.
This means that any vehicle handed over from distributor to dealer would have been subject to sales tax before it reaches the consumer. In the event of a vehicle that is currently in a dealer’s stock inventory but not sold by 1 April, said vehicle would still be subject to GST calculated against its on-the-road price which would include sales tax and the mark up to cover it. Some parties have coined the term double-taxation to describe this particular scenario.
In a special handbook distributed by the Customs Department on GST, provisions have been worded for special refund of goods held in stock before but unsold by 1 April 2015, in which the Government will refund only 20 percent of the total sales tax that has already been paid in full. Upon determining that the claimant is eligible for the refund, the Government will then stagger payment of the refund on a quarterly basis over a period of two years i.e. eight installments.
Aggregating total taxes contributed across the industry, money collected by the Government from the sales taxes of these unsold vehicles add up to a substantial amount. Perodua estimates that each member of its network of independent dealer will stand to lose an average of RM230,000 on double taxation. That amount is likely to be bigger for more expensive brands.
A statement released today by Wan Kamal Wan Ismail, President of the Perodua Dealer Association said, “I wish to plead with the Government of Malaysia to allow us to reclaim the 10 percent Sales Tax on invoices issued prior to the implementation of the Goods and Services Tax on 1st April.”
He emphasized that, “Perodua dealers consist mainly of medium-size companies and losses on this scale will have a huge impact on our business, especially on our cash flow and profitability.”
Keyword: Perodua Dealer Association pleads with Govt to refund sales tax post-GST