GST unlikely to cause tummy ache... maybe just a touch of indigestion

  • Family
  • Friday, 20 Mar 2015

Most processed foods, like fish balls, are in the list of taxable items.

The news is mostly good when it comes to eating out and shopping for groceries, so read on.

THE GST (Goods and Services Tax) going live next month has preoccupied Malaysians from the day it was announced. We have been antsy, wondering what kind of effect it will have on our finances. Some of us have resolved to do without certain luxuries, but doing without food is clearly not an option.

And in a country as food-obsessed as Malaysia, we eat out more often than we probably should.

So here’s the million-dollar question: what changes will the GST cause to the way we shop for food and eat, and how should we prepare ourselves for them?

What’s in your shopping cart? (It counts)

The good news is that the government has drawn up a list of zero-rated items that will not be subjected to tax. More good news is that this list encompasses basic food staples such as rice, bread and cooking oil, and fresh (raw, unprocessed) food such as vegetables and fruits, fish, poultry, egg and meat. While its rationale is to help cushion the impact of the GST on the lower income group, obviously everyone benefits from this.

(For the full list of taxable and non-taxable sundry goods, please visit the official site of the Malaysia GST.)

Corn oil is taxable while palm, peanut and coconut oil are not.

So it really boils down to what you have in your trolley and the type of consumer you are: load up mostly on necessities and you won’t be affected much by the GST. That also means that you are the type who prepares your meals from scratch. Provided you’re quite a simple cook and a dab hand at rustling up equally simple dishes, you can get by with a lot of GST-free groceries.

If you lead a hectic life, wedging trips to the supermarket between work appointments, you’re a shopper in a hurry who needs to take shortcuts. Load up on processed foods such as frozen pizza and spice pastes – which allow you to save time in the kitchen – and your grocery bill will inch up slightly. Watch out, for while raw chicken is tax-free, seasoned raw chicken drumsticks are taxable!

Obviously, you need to arm yourself with knowledge to shop smart to stretch the ringgit. Hint: start by memorising the zero-rated list.

And here’s something else that the smart shopper will find useful: The Ministry of Domestic Trade, Co-operatives and Consumerism has recently launched a nationwide price reduction campaign to help cushion the effects of the GST for the rakyat. Coming a month ahead of the GST, major hypermarkets like Giant, Tesco, Aeon Big, and Mydin Mohamed Holdings have lowered their prices on selected goods by up to 30%.

Aeon Big director A. Rashid Adam says that their “Always Low Prices” promotion was “partly implemented to soften the impact of the GST.” He adds that the price cuts on items like Milo, coffee, rice, noodles, biscuits, and jams will be effective till the end of the year.

Food staples such as fresh vegetables are zero-rated.

He mentions that there will be other promotions in the upcoming months to help shoppers adapt to the GST.

Giant, run by GCH Retail, is committing to a 90-day lock of prices on 1,000 items (26 Feb to 27 May), including a range of groceries.

Its corporate affairs director Roslinda Idrus says that the locked prices coincide with the GST going live, so “customers can calculate their expenses with confidence” during the time period. The hypermarket also has other promotions in the pipeline to aid its customers in “reducing their cost of living”.

Since the price reductions are heavily advertised in the local media, you can easily make your own comparisons between supermarkets to cash in on the best value-for-money offers.

If you are the type who shops at wet markets – you relish price haggling and have nailed it down to an art – continue to do so and you won’t even feel the onset of GST as the majority of items that petty traders sell are zero-rated. But there may well be price differences as a result of other factors.

NEXT: Do we need to pay more when eating out? And what about our favourite street food?

Eating out – do we need to cramp our style?

For the highly mobile and social urbanite, this is probably the biggest worry. This includes the affluent Malaysian who enjoys dining out at fancy restaurants. If you can afford to wine and dine at exclusive restaurants, the 6% tax is an ant bite, surely. But nobody likes to feel the pinch, and cheaper better mah.

What you need to know is this: The threshold for eateries that have to register for GST has been lowered from RM3 mil to RM500,000 in annual taxable turnover. This translates as many more businesses having to register for GST compliance, meaning that GST is levied at many more eateries than the original schedule.

Is this 6% on a greater number of meals eaten out something you’ll be able to afford?

Your restaurant bill will go up just slightly due to the new way the service charge is calculated.

Unless you eat out excessively – in which case you have more pressing problems than just dealing with a new taxation system – the GST is unlikely to pose a serious threat to your wallet.

If you look at your restaurant bills, you are already paying 6% government tax and 10% service charge. GST will replace the government tax and since both are taxed at 6%, there is no difference. But before you heave that great sigh of relief, you need to know that there will be a difference. This is because of the new way the tax on the service charge will be calculated. (Service charge is collected by restaurants for services rendered. Traditionally, it’s set at 10%.)

A bill of RM100 will be taxed 6% government tax (RM6) and 10% service charge (RM10), bringing the total payable to RM116. That is, the government tax and service charge are calculated on the RM100 subtotal. After GST, the service charge will be added to the subtotal (RM110) before GST tax is calculated. That means you will be taxed on RM110 instead of RM100, bringing the total payable to RM116.60 compared to the-before-GST price of RM116, an additional 60 sen.

This is verified by OldTown White Coffee’s chief operating officer and executive director Clarence Leon D’Silva.

“Our customers will be paying the same before or after the GST is implemented. However, as we have a service charge, the only difference is that 6% GST will be applicable to the service charge.”

He adds that the restaurant has put much thought into providing more affordable meals for its customers in the transition period.

So you see, there’s no great cause for concern when it comes to dining in restaurants post-GST. Furthermore, in an economic climate that hasn’t seen much fair weather, it’s in the interest of all eateries to maintain their prices for now. Eating at a fancier restaurant has always cost more, with or without the implementation of the GST.

Prices of street food like nasi lemak are likely to remain the same post-GST.

What about street food?

Ah, what about street food? Here, the scenario is a bit interesting.

According to Federation of Malaysian Hawkers Association president Datuk Lee Teong Chwee, the GST will affect street food, but no, hawkers are not likely to increase prices next month.

“Actually, I would estimate that more than 80% (petty traders and hawkers) have to register for the GST,” he says. That means that most hawkers make over RM500,000 in annual taxable turnover.

“We anticipate that the cost of preparing street food will increase by 3-4%, but prices won’t increase because the petty traders and hawkers will be absorbing the extra cost.”

Lee explains that competition is stiff and there is fear that if they raise prices, they will lose out to hawkers who keep them steady. When the GST goes live, they will be under intense scrutiny by the public and the Government.

“In such an environment, it wouldn’t be wise to increase prices because of the GST. If there are increases, they’ll be caused by other factors, such as bad weather, the availability of produce, and demand and supply.”

Malaysian Indian Muslim Restaurant Owners Association (Presma) president Noorul Hassan Saul Hameed agrees. He is of the opinion that mamak joints won’t be raising prices in order to remain competitive.

“We (mamak restaurants) are so popular with customers because we sell at a lower profit margin. Our prices are comparatively very low. We put our customers’ needs first. We don’t want price hikes either,” he says.

Like Lee, he contends that if prices do increase after the GST, it will be because of other market forces beyond their control. To his knowledge, mamak restaurants traditionally do not – and will not – impose service charge. (And customers do not expect it as the service they offer are often not construed as true “table service” in the expected sense of the term.)

So what you need to know is this: while all GST-registered hawkers and kopitiams must necessarily, by law, charge their customers 6% GST, the prices are likely to remain the same due to some savings from the operators’ eligibility to claim input tax and pass on the savings to their customers.

As to whether either of them expects a decline in customers post-GST, they are both cautiously optimistic.

“I think if there’s a drop in business at first, it will be short term. In the long term, once our customers get used to the GST, it will be business as usual,” Noorul says.

Lee is far more cheerful about the future: “It will be business as usual because we all have to eat as usual!”

NEXT: Will the eating habits of food-obsessed Malaysians change? Plus, GST quickies.

Most dried spices are not taxable but rendang paste and cili Boh are taxable.

Time to get smart

Predicting consumer behaviour and the future is never easy. But based on the scenario, we can say with some certainty that there will be no dramatic change to the way Malaysians shop and eat come G-day.

Fomca (Federation of Malaysian Consumers Associations) secretary-general Datuk Paul Selvaraj concurs, saying that “the impact of the GST on the price of food will be minimal.” He doesn’t believe that the GST going live will suddenly change our eating habits and spawn a new generation of Malaysian home cooks, happy to forgo restaurants and hawkers for meals at home.

“It’s just too convenient for Malaysians to still keep going out to eat. We live in a country where eating at the mamak’s at three in the morning is normal. The GST won’t change that lifestyle. It won’t have that big an impact.”

He does believe that lower-income families will benefit from cooking at home, particularly if there are more mouths to feed. Moreover, zero-rated items on basic food essentials will go a long way to lessening the load of many families.

To better prepare ourselves for the GST, Selvaraj recommends that we read the Shopper’s Guide, a handbook released by the Ministry of Domestic Trade, Co-operatives and Consumerism in January. It can be found online on the official website of the ministry for the various zones in Malaysia: Northern, Eastern, Central, SouthernSarawak, and Sabah.

The guide explains the GST in an accessible way and allows shoppers to make price comparisons of 500 of the most popular basic items, before and after the GST, with the bulk of them food products. The ministry has said that the information on prices will be relevant until June, when there are plans to release an updated handbook.

Importantly, it contains information to assist customers in making complaints against traders who raise prices unnecessarily.

This is a key concern of Selvaraj’s, that “the increase will be more than usual, due to profiteering from businesses.”

His solution is to be constantly alert and monitor prices. If you see something amiss, don’t hesitate to file a complaint. You’re well within your rights. The Price Control and Anti-Profiteering Act 2011 has regulations that stipulate retailers and traders cannot increase their net profit margin for goods and services between January 2015 and June 2016.

If there are no opportunistic price hikes, the GST should cost no significant problems to consumers.

Selvaraj is keen to stress that the GST is a pervasive taxation system; there is no escaping it. One way or another, everyone will pay as they consume. The bigger a consumer you are, the more you’re taxed.

He adds that we should all be informed consumers, with or without the GST.

“In fact, one of the benefits I hope will come out of the GST is that Malaysian consumers will become more empowered and knowledgeable about where their money goes. It pays to be more informed.”

Ultimately, what he hopes is that the GST money will be used properly to benefit the rakyat. “I think what we all want is for the money to be channelled to the right places. We want to see an improvement in the quality of our lives.”

Most processed foods, like fish balls, are in the list of taxable items.

GST QUICKIES: Good to know list

> Corn oil is taxable while palm, peanut and coconut oil are not.

> Raw chicken is not taxable while marinated raw chicken is.

> Most processed food is taxable e.g fish balls, burger patties, canned food, seasoning and pastes.

> Green tea and coffee are zero-rated but not the ready mixes like 3-in-1.

> Caster, icing, rock, palm and brown sugar are taxable while gula pasir, gula pasir halus, and sugar cubes are not.

> Most dried spices are not, including mixed spices (both wet and dry) and chilli powder; rendang paste and cili Boh, however, are taxable.

> Dried noodles including soohoon (except bihun) are taxable but mee, kway teow and laksa are tax-free.

> Infant milk powder is GST-free but milk powder is taxable.

> White and wholemeal bread are GST-free but assorted buns are not.

> Fresh dates are GST-free but dried dates are not; similarly for mushrooms.

> Fresh flowers are pretty on a plate but they are taxable, too.

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