It said on Wednesday the SST, which will come into effect on Sept 1, is unlike the Goods and Services Tax (GST) where all products and services are subject to 6% tax.
“Thus, on the whole, there are possibilities for the overall tax burden to be lower, compared to the GST days.
“Assuming the SST coverage does not impact the goods and services of the lower and middle-income group, their disposable income will improve, which in turn will lift their spending power,” it said.
AmBank Research was commenting on questions raised whether the SST would raise prices.
To recap, the 6% GST drew strong criticism with public opinion citing it has caused overall prices to rise, thus hurting the people’s living cost.
Businesses faced difficulties as reimbursement can be declined with a RM500,000 minimum requirement in annual sales before they can make a claim.
It also pointed out middle men were taking advantage by raising prices.
“We believe the outcome from the SST would be mixed as it depends on the combination of the SST being slapped on the goods and services.
“Thus, different products and services will be affected differently, suggesting households may pay marginally higher for some products and services or the same for some items,” AmBank Research said.
On Tuesday, Finance Minister Lim Guan Eng issued a statement to clarify the issue on SST:
1. The sales tax at a rate of 5% AND 10% applies to selected manufactured and imported products, and not all products, unlike the GST.
2. The 6% Service Tax applies to selected services and not all services, unlike the GST.
3. The Sales Tax is imposed on manufacturers’ and importers’ price, while the GST is imposed on the final consumer price. Hence it is wrong to claim that a “10% Sales Tax is higher than a 6% GST”.
For example, a manufacturer imposes a 10% Sales Tax (RM0.10) on a can of soft drink manufactured for RM1.00. However, when the same can is sold to a consumer at 7-Eleven for RM2.00, a 6% GST of RM0.12 would have been imposed. In this case, it is clear that a 6% GST at RM0.12 would be higher than a 10% SST.
In addition, the Ministry of Finance has undertaken a comprehensive SST review exercise with the assistance of accounting firm Pricewaterhouse Coopers (PwC) tax consultants to simplify SST.
PwC will help rationalize tax collection and reporting requirements to ensure that the SST will be even more efficient and less bureaucratic than the GST, or even the old SST system.
PwC will ensure the SST imposed on 1 September 2018 to be simpler, less cumbersome, prevent leakages and loopholes.
Unlike the GST, which burdens the poor proportionately more, the new SST will also be tweaked and designed to ensure that the impact on the lower income groups will be proportionately less.
The details of the improvements will be announced when the new SST Bill is tabled in Parliament during the current sitting.
Did you find this article insightful?