GST: Traders warned not to pass on the input tax

GST: Traders warned not to pass on the input tax

Published on: Friday, November 14, 2014

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LABUAN: The Anti-Profiteering Unit under the Ministry of Domestic Trade, Cooperative and Consumerism is all set to combat exploitation by traders when the implementation of GST comes into effect on April 1, 2015.
The unit's Deputy Director Low Swee Hon warned that traders cannot pass the cost of input tax to the consumers.
The penalty under the Anti-Profiteering Act for Sdn Bhd is RM500,000 fine for first offence or RM1 million if charged for the second time. For non-corporate, the maximum fine is RM100,000 and three years' jail if charged for the first time.
Input tax is the GST charged on the goods and services used in the business activity which could be claimed by the business owner, whilst output tax is the GST the retailer collects on behalf of the government, charged and itemised when the goods are sold to consumers.
Explaining that it was not the intention to set prices, Low said, "It is up to the business to price their goods within a reasonable margin but not discriminately. If a product is non-GST, the customer should not be billed."
If the cost of doing business has increased, the quantum passed on to the consumer must be within the range.
The investigation, based on complaints and price trends too significant to be ignored, would give the trader a chance to explain.
Speaking at a public forum on GST, she advised traders to be acquainted with their obligations under the new tax regime.
One member from the floor posed the issue of abuse of diesel subsidies, Low told the audience that the Ministry's enforcement had managed to confiscate the fuel valued at RM32 million.
Although Labuan together with Langkawi and Tioman are exempted from GST, logistics, telecommunications, RON 95 petrol and Astro subscription are GST-rated.
Labuan and its dependent islands – Kuraman, Papan, Burung, Rusukan Besar and Rusukan Kechil are duty-free. But lying outside these islands in the high seas are considered Customs Main Area.
A total of 156 companies have registered under the GST to supply goods to the offshore oil rigs.
The forum was moderated by Domestic Trade Enforcement Chief Aslani Dabi while the other panellist was Sabah Deputy Director of Customs, Vanitha Lojuti.

Stagnation and bureacracy aplenty escalate decline..

GST-induced inflation is a given, the danger now is stagflation

November 6, 2014

Stagflation is the combination of a “stagnant” economy and higher “inflation”.

COMMENT

By Liew Chin Tong
Almost a month since Budget 2015 was presented on 10th October 2014, the Government and its backbenchers were trying hard to gloss over the question of GST-induced inflation, let alone answering the real danger on the horizon – that of stagflation.
The general defense of the Government is that there will be a small increase in prices for a short term and some goods would see a fall in prices due to the removal of Sales Tax. That is essentially the line adopted by even Prime Minister and Finance Minister Datuk Seri Najib Razak.
But GST-induced inflation is actually a given.
The government’s own Economic Report 2014/2015 (pg. 129) states “In 2015, inflation is expected to increase 4% – 5%, largely due to the implementation of Goods and Services Tax (GST) and the spillover effect of fuel subsidy reduction in October 2014. Given the subdued external cost pressure, domestic cost remains the major factor that drives inflation in 2015. The implementation of the GST will have a transitory impact on the cost of goods and services.”
“However, the strong capacity expansion over the past years will help to mitigate the cost pressures, while a more cautious stance of consumers would also contribute to moderating demand and hence prevent inflation from becoming more entrenched.”
What the Government has yet to recognise is that of the danger of stagflation caused by a combination of factors such as 1) slower growth in major global economies thus reducing external demand for Malaysia’s goods and services; 2) the depletion of disposable income due to GST-induced inflation hence a plunge in domestic demand.
Stagflation is the combination of a “stagnant” economy and higher “inflation”.
The GST and fuel price hike would force the people to consume less which will hurt domestic demand- a prime mover of the Malaysian economy. At the same time, we could not rely on exports to boost the economy as the three major global markets—the United States, Europe and China’s demand are either weak or stagnant.
Needless to say, the fuel subsidy reduction is making goods and services more expensive than before, further draining the already shrinking disposable income of ordinary Malaysians.
The consequences of impending stagflation could be dire in terms of macroeconomic scale – with no growth, no wage increase, fewer jobs and higher cost of living. The trickle down effect on the rakyat, especially on the lower income group, will be painful. This has been proven in other countries which have experienced stagflation such as Russia, Thailand, and the US in the 1970s.
The government must take heed of the red flags and address the threat of stagflation with appropriate policy responses to get our economy moving again, or risk the impending disastrous consequences.
Liew Chin Tong is DAP National Political Education Director and MP for Kluang.