Goods and Services Tax
(GST) will be implemented effective April 1, 2015 and the rate is fixed at 6%.
Sales tax of 10% and service tax of 6% will be replaced with GST. Under GST,
most of the goods and services (except basic necessities) will be charged at
every stage of the supply chain - even the ones that was previously not charged
with Sales and Service Tax (SST). This means we will likely be paying more to
purchase or use these goods and services, which were not taxed previously.
1. Credit card
The RM50 government
tax charged annually on credit cards and the RM25 fee for supplementary cards,
will be abolished from April 1, 2015 when the Goods and Services Tax (GST) is
implemented. Instead, the 6% GST will apply on the credit card's annual fees -
which can range from RM70 to RM1,000 or more annually, depending on the type of
card.
However, there will be
no GST charges if the annual fee is waived, for example for free-for-life
credit cards or those with annual fees waived, with stipulated minimum spending
or transactions on a monthly or yearly basis.
To reflect the
changes, the GST charged will be reflected as a separate item in the credit
card statement. However, purchases will be reflected as a total amount
inclusive of GST. There is some good news though, loyalty points or cash
rebates will be given based on the 6% GST paid when using the credit card for
retail purchases.
2. Books and e-books
The standard 6% GST
will be imposed on all types of books except for dictionaries, encyclopedias,
newspapers, texts, references, works and religious books. These books will be
zero-rated and not be subjected to GST.
Local e-book suppliers
like e-sentral and MPHonline will also be charging GST whereas foreign firms
such as Google Play and Apple iBookstore would not be.
3. Housing
GST will also see
basic construction materials such as cement, bricks and sand being taxed the
standard 6% GST rate for both residential and commercial properties. Currently,
these raw materials are not taxed under the existing SST. Heavy machineries
such as cranes will be taxed too. Property developers normally do not buy such
heavy machineries but rent them from other contractors - and it typically is
factored into the construction cost.
Steel, bricks, and
sand make up 44% of the construction cost and with these being charged GST, the
cost of building a property is inevitably going to increase. Property companies
expect GST to result in a maximum of 2.6% increase in house prices.
When the GST is
implemented in April, residential property including SoHo (small office/home
office) will be exempted. However, commercial properties including SoFo (small
office/flexible office) and SoVo (small office/virtual office) would be subject
to the 6% GST.
4. Fuel
RON95, Diesel and LPG
(liquefied petroleum gas) will be exempted from GST implementation. However,
RON97 will be subjected to the new 6% GST.
5. Electricity
A household will have
6% GST charged to the electricity bill for usage above 300 units.
6. Used cars
Currently, used cars
are not subjected to SST and is not a GST zero rated item either. Therefore the
car industry predicts that used cars will be subjected to an extra 6% tax after
the implementation of GST in April.
7. Banking services
The RM1 MEPS fee
charged when we withdraw from another bank's ATM will increase to RM1.06. No
GST will be charged if you make a withdrawal from your own bank's ATM.
Similarly, other
services offered by the bank, such as money transfers (e.g. cashier's order and
demand draft), telegraphic transfers, money exchange, loan, cheque, credit
card, and debit card will see 6% GST charged to its service, commission or
subscription fee.
8. Tuition fees
Beginning April, 6%
GST will be imposed on tuition fees, as tuition centres are not categorised
under educational institutions.
9. Beauty services
The price of beauty
services like manicure, and hair and facial treatments will be subjected to 6%
GST too. Massage services are also chargeable with the GST if the annual
turnover for such businesses is RM500,000 and above. Aside from beauty
services, cosmetics and other products for skin, hair and body care will also
be charged GST.
However, operators
registered to implement the GST will be able to lower their costs by claiming
the input tax credit for premises rental fees, electricity costs and equipment
purchased to carry out the services. Input tax refers to the GST paid by
businesses on the purchase of goods and services used to perform their
businesses.
Beauty products sold
at airports as duty-free items will not be subjected to GST.
10. Insurance fees
All insurance policies
except for life insurance will be charged 6% GST from April. GST would also
impact all traditional and investment-linked policies which had medical,
critical illness or personal accident benefits attached.
For traditional
policies, the GST is imposed on the premium, while for investment-linked
policies, it is charged on the insurance charges. For investment-linked
policies, insurance charges will escalate with age because of higher insurance
charges.
While it is still not
clear how much prices will increase, or in some instances, decrease, it is
prudent to know your exempted and zero-rated items to avoid opportunists
merchants who may be profiteering on GST.
With less than a month
away before GST is actually implemented, it is wise to understand how GST will
affect both our daily or seasonal spending. This will help us to plan our
spending ahead, to minimise the negative effect of GST.
