PETALING JAYA: The Consumer Price Index (CPI) is expected to be lower next year due to the expanded zero-rate and exempt list under the goods and services tax (GST), said Customs Department GST director Datuk Subromaniam Tholasy.
He said that the Government had initially estimated the CPI to go up by 1.8%, as announced by Prime Minister Datuk Seri Najib Tun Razak when tabling Budget 2014 last year.
Subromaniam said that with the lengthy zero-rate and exempt list, the expected additional CPI was expected to increase by 1% instead.
Among the items that have been classified zero-rated is petrol, which if was subjected to GST would have had a bearing in increasing inflation. However, Najib had announced that petrol would not be subjected to GST when it comes into effect on April 1 next year.
Malaysia’s CPI in September grew 2.5% from a year earlier.
“Additionally, the increase in CPI is mainly for products commonly consumed by the high-income group, such as jewellery and expensive cars. The lower-income groups will suffer little impact as most of their income is spent on basic food and household items,” he told StarBiz.
He also stressed that Customs expected the reactionary inflation due to the GST’s implementation to be a “one-off increase and short-lived”.
This agrees with some economists’ views that the impact of GST on inflation would be short term.
“Long term, the GST will bring benefits to consumers because it eliminates hidden taxes. In fact, the impact will be even lower than in other countries because of our extended zero-rate and exempt list,” he said.
Subromaniam said Malaysia’s GST model was progressive and not regressive as the zero-rate and exempt list sought to ease the financial burden of the lower and middle-income groups.
A recent household expenditure survey showed that the lower and middle-income groups spent close to 40% of their money on basic food items, while the higher income group spent just 9% on this category.
During a GST talk at Menara Star on Thursday, he said that online sellers should impose GST based on the residency status of the customers.
“If you are unable to determine the status, the service provider is required to ask the buyer for a declaration of the country he or she is residing,” he added.
Subromaniam urged businesses with a sales turnover of RM500,000 or more to quickly register with Customs so that they could benefit from the free hand-holding programmes held from October till December.
He said that as of Thursday, 93,078 companies had already registered with Customs.
Those who fail to register by the Dec 31 deadline will be registered automatically by Customs and fined according to the Goods and Services Act 2014.