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New guidelines governing SST

  • The government must ensure that the implementation and enforcement of SST fulfill the government's financial needs as well as aspiration of the people.

Sin Chew Daily

SST will go into implementation with effect from September 1, at 10% sales tax and 6% service tax respectively.

The policy has since triggered tremendous contentions on both sides of the political divide while members of the public are concerned about the rising cost of living following the reintroduction of SST in the place of GST.

So far the government has not unveiled the details and complete taxation structure. However, based on the Sales Tax Act 1972 and the Service Tax Act 1975 and past applications, it is anticipated that businesses can look forward to reduced operating costs and improved cashflow although the cost reduction is minimal and will therefore not impact goods prices.

Prices of certain products will nevertheless be higher than when GST was in force, and the public are concerned that the range of products subjected to SST will be expanded.

Finance Minister Lim Guan Eng insists that SST will not burden the low-income group as much as the GST, and the government will ensure that the re-introduction of SST will have minimal effects on this group of people.

According to Prime Minister Tun Dr Mahathir Mohamad, SST is a single-tier taxation system while GST is multi-tier. Despite the 10% sales tax, you won't have to pay the tax if you don't purchase specific items even if you won't evade the 6% service tax.

Theoretically, prices of most goods will be cheaper than when GST was in place, but if this is misunderstood, it could spark another round of inflation and undesirable chain effects.

To manufacturers and merchants, if the operating cost is increased, it is inevitable that the additional cost will eventually be transferred to consumers.

As SST is a single-tier system, merchants cannot claim back the input tax as in GST, and the cost will therefore be hidden in the price. Even if the merchants do not absorb the cost themselves, the taxation cost will also be transferred to the consumers.

As a matter of fact, the many public concerns serve to show that GST is indeed a relatively more transparent system that fulfills international requirements and is more easily understood by the people.

Now that SST is about to be implemented, it is unlikely for the government to renege on its election pledge of abolishing the GST and allow it to run albeit at a lower rate.

To allay the fears of the public, perhaps the finance ministry should draw up a brand new taxation scheme coupled with effective supervision and implementation, especially on the part of the domestic trade and consumer affairs ministry, to ensure that unscrupulous merchants will not exploit the tax loophole to deplete the treasury of its tax revenue while profiteering by making consumers pay excessively high prices.

Past experiences should serve as an important lesson for the government to ensure that the implementation and enforcement of SST fulfill the government's financial needs as well as aspiration of the people.

Lim Guan Eng reiterates that the finance ministry will seek the assistance of tax experts in reviewing and streamlining the SST implementation to minimize hassle and irregularities.



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