GST reintroduction could raise car prices in Malaysia by 1-3%, according to AmInvestment Bank analyst

GST reintroduction could raise car prices in Malaysia by 1-3%, according to AmInvestment Bank analyst

According to AmInvestment Bank analyst Alex Goh (as reported by Bernama), car prices in Malaysia are expected to increase by 1% to 3% should the government switch back to the goods and services tax (GST), which is the opposite of what happened when the sales and service tax (SST) was implemented back in 2018.

Earlier this month, prime minister Datuk Seri Ismail Sabri Yaakob revealed the government was considering reintroducing the GST to expand its revenue base and carry the weight of public subsidies. “We lost RM20 billion in annual revenue when we abolished the GST and replaced it with the old SST. No other country in the world has reverted back from GST to SST, except for Malaysia,” he told Nikkei.

More recently, the Federation of Malaysian Manufacturers (FMM) said it welcomed the return of GST, although it must be at a rate that will not burden the rakyat – the GST rate was 6% previously. FMM president Tan Sri Soh Thian Lai explained that GST provided a fairer tax structure and eliminated cascading and compounding of taxes commonly found in the SST regime.

GST reintroduction could raise car prices in Malaysia by 1-3%, according to AmInvestment Bank analyst

He added that Malaysian exports would also become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain.

Winding back the clock, car prices did, by and large, decrease somewhat when GST replaced SST in 2015, although there were also some models that saw increases. As we reported previously, there were also large-scale price drops when SST was reimplemented in 2018, so it’s not an apples-to-apples comparison as the differing methods in calculating GST and SST complicates matters.

We previously prepared a deep dive into the differences between GST and SST, which you should check out to better understand the mechanics of the two tax regimes. As a quick recap, the GST is a value-added tax where tax is paid at every stage of the business transaction versus SST’s one-time tax, which is paid by the manufacturer/importer.

GST reintroduction could raise car prices in Malaysia by 1-3%, according to AmInvestment Bank analyst

However, it should be noted that the total amount of tax paid under GST is actually lower due to its input tax claim mechanism. In essence, the final GST amount is borne by the consumer versus the SST, in which the quantum is paid by the importer or manufacturer.

Price adjustments varied greatly across brands during the introduction of both GST and SST, with the latter generally leading to increases in fully-imported (CBU) models. It was also noted that SST is absorbed for CKD vehicle components, which helps keep prices of locally-assembled vehicles lower. Car companies will also adjust the way the prices of their models are calculated to account for these changes to satisfy customers and the government’s requirements.

At this point, do you support the government’s proposal to reintroduce GST or should SST be maintained? Let us know what you think in the comments section below.

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Gerard Lye

Originating from the corporate world with a background in finance and economics, Gerard’s strong love for cars led him to take the plunge into the automotive media industry. It was only then did he realise that there are more things to a car than just horsepower count.

 

Comments

  • Azeezjibkor on Jun 07, 2022 at 11:14 am

    Pls raise GST abolish fuel subsidies.See what’s gonna happen.Good luck to Sabrikor.

    Like or Dislike: Thumb up 9 Thumb down 2
    • Risky on Jun 08, 2022 at 1:16 am

      Just stick with SST. With GST, prices for essential goods including food and drinks will go up

      Like or Dislike: Thumb up 10 Thumb down 1
  • Eat My Smoke on Jun 07, 2022 at 11:22 am

    Car price slight increase OK
    Cheap fuel is the problem

    Now 65% more RON97 users switching to RON95 will burden gomen even more subsidy(every liter >RM1.70 in early April). Literally gomen is paying more for every litre we buy RON95 now

    So to resolve traffic jams and promote public transport usage, gomen please market-float RON95 @RM4.50

    Once fuel subsidy is removed, whatever foreign vehicles pump also OK. Anyway our EURO4 fuel is cheaper than EURO6 in SG

    Like or Dislike: Thumb up 5 Thumb down 5
    • Rosmah & Ajibkor on Jun 07, 2022 at 5:29 pm

      Dude,you drivng new BMW,u can afford.Kami driving 2005 BMW.

      Like or Dislike: Thumb up 4 Thumb down 5
      • Eat My Smoke on Jun 07, 2022 at 11:38 pm

        Just stating the fact dude. Even though is ugly but that’s one heal of the truth

        Like or Dislike: Thumb up 0 Thumb down 1
  • Ben Yap on Jun 07, 2022 at 11:24 am

    everything increase and more people are getting poorer by the day.

    Like or Dislike: Thumb up 14 Thumb down 6
  • Dong Gor on Jun 07, 2022 at 11:35 am

    Best is get the car during the tax holiday. If GST is going to raise it 1-3%. that means the total impact would be 4-7% more compared to those who get before end of this month.

    Like or Dislike: Thumb up 1 Thumb down 6
    • But….. on Jun 07, 2022 at 4:29 pm

      Tax holiday cannot be long. Keep selling keep selling during tax holidays, later got heavy jams. Service will also take disadvantage. And the government also needs money to pay oil subsidy, salary, important necessities.

      Like or Dislike: Thumb up 9 Thumb down 3
    • drive old car for another 2 years and save up all the money for rainy day

      Like or Dislike: Thumb up 0 Thumb down 0
  • dimitriy on Jun 07, 2022 at 11:50 am

    “No other country in the world has reverted back from GST to SST, except for Malaysia,” he told Nikkei.” ini sebab negara lain tiada PakKartun Rakyat. Apa boleh buat, rakyat sudah memilih dan percaya dengan ‘Manifesto bukan kitab suci’ la.
    “FMM president Tan Sri Soh Thian Lai explained that GST provided a fairer tax structure and eliminated cascading and compounding of taxes commonly found in the SST regime.” INI orang ada komen macam ini masa PH hapuskan GST tak?

    Like or Dislike: Thumb up 5 Thumb down 16
    • Kea Was on Jun 07, 2022 at 4:36 pm

      Masalahnyammya zaman BN tak nak “refund” GST tax balik kepada peniaga selama bertahun tahun menyebabkan barang harga pun naik. So apa pulak ini cerita?

      Like or Dislike: Thumb up 40 Thumb down 26
      • Amran on Jun 08, 2022 at 11:00 am

        Nak refud macam mana? LHDN dah kata 60% of delays due to incomplete/erroneous documentation, 20% due to wrongful claims (cannot claim back), 10% due to retailer POS system not cater to GST, and only 10% are caused by LHDN fault mainly system or record or banking details not matching. Apa nak cita hang?

        Like or Dislike: Thumb up 7 Thumb down 9
  • Kea Was on Jun 07, 2022 at 12:08 pm

    Oh no, come we have to get back the Ahmad guy to defend the GST car price reduction and then show us some cooking demonstration of clear porridge for the economy.

    Like or Dislike: Thumb up 24 Thumb down 5
    • History Bender on Jun 08, 2022 at 11:07 am

      Oh you mean this:
      https://paultan.org/2015/04/01/gst-toyota-lexus-cars-cheaper-by-up-to-rm4k-or-2/

      https://paultan.org/2015/04/01/honda-malaysia-gst-price-list/

      https://paultan.org/2015/04/01/gst-all-proton-models-now-cheaper-by-up-to-3-25/

      https://paultan.org/2015/04/01/gst-perodua-car-prices-reduced-by-0-1-to-1-6-depending-on-model-spare-parts-prices-maintained/

      https://paultan.org/2015/04/01/gst-mitsubishi-updates-prices-down-rm200-to-rm2k/

      https://paultan.org/2015/04/02/gst-volvo-updates-prices-reduction-for-some-models/

      https://paultan.org/2015/04/02/gst-all-mazda-prices-reduced-for-existing-model-lineup-prices-announced-for-mazda-3-ckd-and-6-fl/

      https://paultan.org/2015/04/02/gst-kia-updates-pricing-reduction-of-rm200-to-rm2k/

      https://paultan.org/2015/04/06/gst-infiniti-reveals-new-price-list-all-models-cheaper/

      https://paultan.org/2015/04/17/gst-hyundai-prices-up-to-rm400-down-rm4-6k-up/

      Was all a LIE?!?! History as we knew it was all fake?! That someone so powderful had bended history?!

      Like or Dislike: Thumb up 3 Thumb down 8
  • Celup King on Jun 07, 2022 at 12:12 pm

    Aik. This same story again ahh? Last time prior to GST1.0 all those so called experts oso said GST will raise prices but come GST, lastlast all car prices drop! Ambank boleh caya ke?

    Like or Dislike: Thumb up 16 Thumb down 25
  • hahaha on Jun 07, 2022 at 1:36 pm

    GST is the way to go!!!

    Like or Dislike: Thumb up 13 Thumb down 20
    • Risky on Jun 08, 2022 at 1:19 am

      Reintroducing GST can, but our gomen will need to think again before reintroducing GST, or else the price for essential items including food and drinks to go up. Better to stick with SST

      Like or Dislike: Thumb up 7 Thumb down 1
  • AppleTree on Jun 07, 2022 at 1:50 pm

    flip flop flip flop.

    When remove GST, and put in SST, “experts” say car price increase by X%.
    Now, if govt remove SST and replaced back with GST, the same “experts” are saying, car price will increase again.

    So which will increase the tax? GST or SST? It seems to me, whether GST or SST, and depending where are you standing, you will get the right expert to tell the rakyat which tax type is a burden.

    Like or Dislike: Thumb up 4 Thumb down 0
    • Rakyat Malaysia on Jun 07, 2022 at 4:25 pm

      The Pakatan tax experts will tell you its a burden.
      The BN tax experts will tell you prices will drop.
      Who to belip?
      Trust historical data that prices did come down overall. So which side was more honest to us? Paham jelah.

      Like or Dislike: Thumb up 13 Thumb down 19
  • @Snakebabu on Jun 07, 2022 at 2:00 pm

    Tak reti nak urus takbir negara dengan effektif, nak bebankan rakyat lagi, kimak sungguh!

    Like or Dislike: Thumb up 15 Thumb down 1
    • Fake News on Jun 07, 2022 at 4:26 pm

      Betul tu. PH has to die!

      Like or Dislike: Thumb up 30 Thumb down 47
      • BN: caused 1mdb fiasco, stole rakyat duit, racist against our minority fwens.

        PH: failed to deliver some promises, too much internal conflicts, some sapporkers racist against us.

        we nid something fresh.

        Like or Dislike: Thumb up 6 Thumb down 3
  • dong gor on Jun 07, 2022 at 2:39 pm

    put the complicated car calculation aside. say if we go to service a car, say only involve engine oil and labor.oil cost 100, labor 10.
    SST 110 +10.5 = 120.5
    GST 106 + 10.6 = 116.6
    GST seems cheaper, which not make sense as that is not the final outcome what the government try to achieve (make more money)

    Like or Dislike: Thumb up 5 Thumb down 0
  • Bieight8 on Jun 07, 2022 at 3:18 pm

    Car prices and fuel need to increase 30% in order to reduce congestion

    Like or Dislike: Thumb up 11 Thumb down 4
    • Right? on Jun 07, 2022 at 10:39 pm

      Why don’t we just sterilize the B40 (if they don’t want to change). You can see many PPR park their car over there. Many PPR/rumah mampu milik B40 = many car = congestion.

      Like or Dislike: Thumb up 2 Thumb down 1
  • Last time 6%, better make it 10%, so M'sia can maju fast2 on Jun 07, 2022 at 10:34 pm

    Reinstate or not, the car price already increase. I went (7th June 2022) to Nissan Showroom (Sg. Rasah), and the salesman told me the price for Navara (cuz I’m looking for pickup) increase nearly 10k starting today. The price shown on the pricelist were yesterday price. And guess what? They said no promo/discount and they can only give 10k worth or accessories in which we can get it much2 cheaper (at a fraction) outside.

    Like or Dislike: Thumb up 0 Thumb down 0
  • Risky on Jun 08, 2022 at 1:17 am

    Just stick with SST. Later with GST, will have big problem and prices for essential goods including food and drinks will go up

    Like or Dislike: Thumb up 14 Thumb down 0
 

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