Cheaper cars with GST? It’s possible, Customs man suggests

KUALA LUMPUR, Oct 6 — Malaysian car buyers may see lower prices when the goods and services tax (GST) comes into effect next year although sellers could suffer from higher depreciation as a result, a Customs Department official has suggested.

Commenting on the effects of the new consumption tax on the local automotive sector, Customs Department GST Director Datuk Subromaniam Tholasy said the lower rate of taxation may translate to a marginal reduction in retail prices.

“Theoretically, the prices will come down, between one [and] three per cent. But having said that, we must always remember, that’s for new cars,” he was quoted as saying by national news agency Bernama.

“When new car prices come down, what happens to the old car? It will even go down further next year. If you want to change (old car), you change this year. If you are going to change next year, probably it will be worse off, unless you are making a first purchase of new car.”

But Subromaniam took pains to say that his forecast was not absolute, explaining that taxation was not the biggest determinant in vehicle prices here.

Aside from the 10 per cent sales and services tax (SST) currently levied on the retail price, vehicles sold in Malaysia also attract varying degrees of excise duty depending on their origin and level of local content.

The senior Customs officer also said currency fluctuations may wipe out any potential cost savings from the GST for consumers.

“So, I will never say that car prices will go down. I don’t know, nobody knows,” Subromaniam said further in the Bernama report today.

A GST of 6 per cent will come into effect on April 1, 2015 and will replace the existing SST.

Malaysians pay among the highest prices for cars in the world due to protectionist measures introduced to shield local carmakers from competition.

High vehicle prices that require almost a decade to pay off are among the factors contributing to the country’s high household debt, which hit 86.3 per cent of GDP in 2013 when it had been just 60.4 per cent less than six years ago.