KUALA LUMPUR, Sept 26 — Almost a month after Putrajaya rolled out the new Sales and Services Tax (SST), the full impact is yet to be felt on the ground, with consumers interviewed by TODAY saying they have not seen a pronounced dip in the cost of living.
Self-employed Lester Kong, 38, who is based in Kuala Lumpur, said the only reduction he sees is his broadband bill, which has gone down slightly from RM200.35 to RM189.
“Other than that, my expenses remain more or less the same, at RM1,200 a month,” he said.
Systems engineer Ng Jason added: “My monthly household expenses only dropped by RM100, from RM1,500 during the pre-SST time to RM1,400 now.”
Ng, 37, who lives in Seremban, Negri Sembilan, said that during the tax free holiday, after the Goods and Services Tax (GST) was zero-rated and before the SST kicked in, “we were buying a lot of things because it was cheap”.
“But as we anticipate prices to increase in the next few months (as the SST system is fully implemented), we can no longer indulge in impulse buying and have to budget accordingly.”
In June, Prime Minister Tun Dr Mahathir Mohamad’s government zero-rated the unpopular 6 per cent GST which took effect in April 2015.
Dr Mahathir had promised to scrap broad-based consumption tax if his Pakatan Harapan (PH) coalition won the May general election.
The high cost of living was a hot button issue during the campaigning, and seen as one of the key factors for the defeat of the Barisan Nasional coalition led by Najib Razak.
In place of the GST, Putrajaya has reintroduced the SST which was in place years ago. The SST imposes a tax of between 5 per cent and 10 per cent on the sale of goods, while services attract a 6 per cent levy.
SST is only levied during the initial manufacturing stage, while the GST is charged at every stage of the supply chain.
While the percentage charged on goods under the new SST regime appears to be higher than under the old system, a total of 5,443 items are now exempt, compared with 544 items under the GST regime.
In all, the SST will only be applicable to 38 per cent of the Consumer Price Index (CPI) basket of goods, compared with the 60 per cent under the GST regime.
Among the items that are not taxed are food items such as rice, cooking oil, bread, baby food products and bottled drinking water. Also exempted are general goods such as newspapers and wheelchairs, medicine as well as construction materials such as sand, cement and bricks.
Eateries will only be subjected to the SST if their annual turnover exceeds RM1.5 million annually.
Son Tong Leong, the group chief executive officer of Oriental Food Industries Holdings, which manufactures snacks and confectionery, noted that consumers are actually not experiencing much savings despite a lower SST rate.
There is minimal difference between the 6 per cent GST and the 5 per cent SST for example, which translates into savings of “a few cents” for customers, he said.
At the same time, manufacturers have been absorbing hidden costs such as professional and agent fees.
“That is why you end up with some items not seeing any change in price,” he said.
As rising cost of living is a bug bear for many Malaysians, Universiti Malaya’s political analyst Awang Azman Awang Pawi said if it does not go down, or worse, increases in the next few months, people will lose confidence in the government.
“(PH’s) election manifesto has stated that prices of items and cost of living will stabilise if they win the election… If they fail to (fix the issue), support for them may be affected when they go to the polls five years later,” he said.
The CPI index has been trending down to below 1 per cent in the last three months, when things were tax free.
Economist Lee Heng Guie, the executive director of independent research house Socio-Economic Research Centre, said: “We expect prices (of goods) to remain stable or decrease when the next CPI for September is released in the middle of next month.”
Commercial property sales pick up
One sector that seems to have benefitted from the SST regime is commercial properties, based on anecdotal evidence. These properties are not subject to the new tax, unlike during the GST regime.
Residential properties however, are exempted from both GST and SST.
A clearer view of where the commercial properties sector is headed is only likely to emerge over the next few months.
But for now, a salesman for a commercial property development in Melaka, who declined to be named, said sales for his company’s service suites and service residences have soared by 30 per cent since the GST was zero-rated.
Citing an example, he said buyers now save RM48,000 for a 700 sq ft unit as opposed to during the GST regime, where a similar unit used to cost RM850,000.
“Previously people were holding on and not buying these properties due to the tax... but now we are doing so well that only limited units are left,” he said.
Lawyer Chew Wee Kian, whose firm in Melaka does conveyancing work, said he has done “three or four” transactions involving commercial properties since June 1.
In contrast, he did no such transactions when the GST regime was in place.
“(In the past), we hardly saw any commercial property transaction due to lack of demand. Now with SST, we are seeing demand pick up,” he said.
What does this augur for the property market?
Ngan Chee Meng, the chief executive officer of major property developer Gamuda Land, said that those looking at commercial and industrial developments will benefit from SST as there will be immediate tax savings of six per cent compared to the GST regime.
He added: “With the abolition of GST and the exemption of SST for construction services and building materials in Malaysia, the pressure on house prices as well as industrial and commercial developments is expected to ease”.
Professor Yeah Kim Leng, an expert in economics from Sunway University, added that the interest in commercial properties will have a positive impact on the overall property market.
“It will attract more demand and that will increase market buoyancy that has been experiencing a slowdown since 2014/2015,” he said. — TODAY
