KUALA LUMPUR: Slightly more than half of the Chinese business community (54.6%) in a survey indicated that the goods and services tax (GST) is a more preferred tax system than the sales and service tax (SST), according to the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), Malaysia’s Business and Economic Conditions Survey Report for 2H18 and 1H19 forecast released today.
This is particularly for the manufacturing sector as exports are zero-rated and eligible to claim input tax. For SST, there is no complete relief for exports. Companies cannot claim input tax under SST, except for manufacturers who deal with exports.
ACCCIM SERC Sdn Bhd executive director Lee Heng Guie (pix) said about 41.5% of respondents, mostly in the manufacturing and construction sectors, cited that the SST has an adverse impact on their business despite being granted SST exemption to main building materials and construction services.
“In the manufacturing sector, the GST provides the rebate, the offsetting effect between the input and output tax,” Lee explained at the ACCCIM press conference today.
In contrast, 52% indicated that the SST has no impact on the business.
However, by size of companies, with the exception of manufacturing sector and trading companies, which were impacted directly, SMEs in most other sectors rated SST over GST as a preferred taxation system as it imposes tax only at each level compared with the GST where tax was imposed at every level – from manufacturers to wholesalers, retailers and consumers.
Under the GST, those who have turnover of RM500,000 annually had to register for imposition of the 6% GST rate. This is different from SST whereby those having turnover of RM500,000 or RM1.5 million (for food and beverage operator) annually, but if their items and services are not in the tax list, need not register for it.
When asked about the impact of SST on input prices and selling prices, a high percentage of respondents ranging between 40% and 72% in all industries reported an increase in input prices, and some have generally raised their selling prices. This suggests some companies could not absorb the increased costs and partially pass it through to the consumers.
Survey results also indicated that for those who have incurred higher input prices, 66.1% of them have increased their selling prices. A majority of SMEs in the manufacturing and wholesale, and retail trade sectors reported that input prices have increased by over 10%. The wholesale and retail trade sector represents the largest percentage (53.5%) that has increased their selling prices compared with other sectors.
Overall, 62.3% of total respondents are expected to utilise 1-10% of tax refunds from GST and income tax (RM37 billion in 2019) for capital investment or domestic spending. About 17.7% of respondents will set aside 11-20% and 14.8% will spend 21-30% of total refunds. Only 5.2% will spend more than 30% of total refunds and they are mainly from the real estate and professional and business sectors.
As at February 2019, RM7.9 billion in refunds for the GST (RM4 billion) and income tax (RM3.9 billion) have been paid out.
Lee said the utilisation of GST and income tax refunds for capital spending and consumption would augur well for domestic economic activities.
“We hope that the audit process can be expedited so that it would speed up the refund and money can go back to the business sector,” said Lee.
