Gold bullion traders hoping for GST exemption

Gold demand in Singapore in 1993 was at 21.4 tonnes and in Malaysia it stood at 22.4 tonnes. Six years after Singapore implemented the GST in in 1994,and Singapore only recorded 12.1 tonnes while Malaysia raked up 21.1 tonnes - Reuters Photo.

KUALA LUMPUR: A gold bullion trading company, Nubex Sdn Bhd, is hoping the government will consider exempting investment in precious metals (IPM) from the Goods and Services Tax (GST) when the Budget 2015 is tabled on Oct 10.

CEO Mohd Faizal Mohd Nor said Malaysia had to date not imposed any form of tax on IPM.

This policy, he added, has attracted local and foreign investors to IPM in the country.

"However, with any implementation of the GST, the scenario might change," said Mohd Faizal.

Singapore, which began implementing the GST from 1994, started to exempt IPM from the tax only in October 2012. But demand for gold had deteriorated and shifted to Malaysia.

"If the Malaysian government does not act to exempt IPM from the GST, the same scenario will prevail after 2015. Only this time, Malaysia will be at the losing end," Mohd Faizal said.

Gold demand in Singapore in 1993 was at 21.4 tonnes and in Malaysia it stood at 22.4 tonnes. Fast-forward to 2000, and Singapore only recorded 12.1 tonnes while Malaysia raked up 21.1 tonnes.

Obviously realising the situation, Singapore's government in 2012 announced its ambition for the city-state to become a regional precious metal trading hub and moved quickly to remove the GST for IPM.

According to Mohd Faizal, the government has to make up its mind on whether the IPM should be included or exempted from the GST, as it is a very important investment portfolio.

"Unlike commodities like crude palm oil, gold for one, can neither be planted nor bred. There is also no evidence thus far that Malaysia has a large gold reserve. As such, promoting Malaysia as a gold market should not be done via mining activities for the commodity.

“Instead, it should be promoted as a primary gold hub by providing facilities like refinement, storage, security, assay, and marketplace," he said.

Mohd Faizal also expressed concern that as the April 2015 dateline for implementation of the GST nears, investors would start moving funds to Singapore to buy IPM.

"Six per cent may seem nothing when you buy a shirt. But when applied to a gold kilobar, it can cost you around RM8,000," he said.

On another note, Mohd Faizal said the local gold market in the next five years, will largely depend on how the government treats IPM. – Bernama