No GST on prepaid reloads but tax on usage, Putrajaya says

Shabery explained that users who purchase an RM10 mobile prepaid reload will receive an RM10 credit upon activation but will subsequently be taxed on their usage of each call and text message. ― Malay Mail pic
Shabery explained that users who purchase an RM10 mobile prepaid reload will receive an RM10 credit upon activation but will subsequently be taxed on their usage of each call and text message. ― Malay Mail pic

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PUTRAJAYA, May 13 ― Putrajaya announced today that mobile prepaid users will not be charged the Goods and Services Tax (GST) when purchasing reloads but will have to pay the 6 per cent consumption tax upon using the service.

Communications and Multimedia Minister Datuk Seri Ahmad Shabery Cheek explained that users who purchase an RM10 mobile prepaid reload will receive an RM10 credit upon activation but will subsequently be taxed on their usage of each call and text message as well as data.

"Today the Cabinet decided to agree with the ministry's suggestion so that prepaid mobile reloads sold at RM10 will receive RM10 upon activation,

"The GST tax for the prepaid value will be charged on the usage or usage-based,

"The government views this as a fair way as the government does not collect taxes before the service is used," Ahmad Shabery told a press conference today.

This new system, however, will not be implemented for another six months, he said.

The minister also did not explain in greater detail how the GST would be taxed on each call or text message although he insisted that it will be "usage-based."

He added that the ministry is also urging telecommunications companies to reduce the cost for calls, text messages and mobile Internet in order to balance out the additional amount users would have to pay come November.

"That's why to balance the GST implementation, we've asked the telco companies to reduce further the cost because the trend shows it's getting cheaper,

"Before when the prepaid system was first implemented, one call was RM2.40 a minute but it has reduced and now it's only 33 sen a minute, each SMS was 40 sen now it is 1 sen," he said.

He added that telecommunications companies have a responsibility to reduce their prices and improve their services so that the public receives the same or better services for the amount they pay.

"This is a win-win. The government still gets to collect GST, which is important to return to the people...  the prepaid economy produces RM15 billion a year, it's a big economy.

"We don't only look at the people's need in terms of affordability but also the quality of service. What's the point if it's cheap but there are dropped calls, no 3G connectivity, you cannot use WhatsApp, that's why it's the telcos’ responsibility to improve their services," he said.

The pricing of prepaid reloads was among the most visible signs of confusion following the implementation of the GST, after telecommunication companies raised prices to incorporate the tax, despite public directives from Deputy Finance Minister Datuk Ahmad Maslan not to do so.

The Customs Department on April 29 told telecommunication companies to revert the prices for prepaid reload coupons to pre-GST levels by May 1, meaning that a RM10 top-up card would be sold at RM10 with airtime credit of RM9.43.

However, the Malaysian Communications and Multimedia Commission (MCMC) said prepaid reload coupons will still be sold with GST added to the price, meaning Malaysians will buy a top-up coupon valued at an airtime credit of RM10 for RM10.60.

This finally prompted Prime Minister Datuk Seri Najib Razak to tell Ahmad Shabery to “take charge” of the issue. He also enforced a gag on non-ministers making statements on the matter on May 1.

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