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Not All Goods Prices Will Go Up After GST

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KUALA LUMPUR – Allegations that the prices of all goods and services will increase with the implementation of the Goods and Services Tax (GST) from April 1 are baseless because only some will, some will fall and some will be the same.

A research on the Consumer Price Index (CPI) shows that eight categories of goods and services will result in price reductions.

Clothing and footwear will decline 2.71 per cent; communication (1.86 per cent); furnishing, household equipment and maintenance (1.57 per cent); restaurants and hotels (1.2 per cent); transportation (0.94 per cent); alcoholic beverages and tobacco (0.73 per cent); housing, water, electricity, gas and fuels (0.12 per cent); and miscellaneous goods and services (0.08 per cent).

The prices of other categories of goods and services in the CPI basket, such as education, health, recreation and culture, food and non-alcoholic beverages and food away from home, are expected to increase slightly by between 0.67 per cent and 2.21 per cent.

This is because currently these goods and services are not subjected to sales or service tax.

Some goods will also remain unchanged as some companies plan to maintain product prices to stay competitive.

Malaysia’s GST model, despite the many negative comments, is designed to be a progressive tax with the long list of exempted, zero-rated and relief supplies.

The government has maintained that basic food items, education and petrol will not be subjected to GST.

This is to ensure that the low- and middle-income groups are least affected like in Vietnam’s and Ethiopia’s models.

So, progressive taxation system means the high-income earners paid more taxes compared to the low- and medium-income groups.

In another development, entertaining every demand for exemptions and zero-rating will only invite more demand and the process will never end.

Be mindful of the fact that exempting too many items may adversely impact the size of the resulting revenue and the current rate of six per cent will have to be raised.

Ultimately, it has to be borne by all and is unfair especially to those in the lower-income group.

It is also far from the truth that revenue from GST will be used by the government to plug ‘leakages’.

That is merely speculation because it is not backed by hard evidence and facts.- BERNAMA

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