Guan Eng debunks notion that tax imposed under SST will be higher

PETALING JAYA: The re-introduction of the Sales and Service Tax (SST) – a 10% tax on sale of goods and a 6% tax on services – does not mean that the tax imposed will be at 16%, the Finance Minister said.

Lim Guan Eng said it would be comparing apples with oranges by simply adding up the SST and comparing it to the 6% Goods and Services Tax (GST).

In a statement, he explained that the sales tax, at a rate of 5% and 10%, applies to selected manufactured and imported products, and not all products unlike the GST.

“The 6% service tax applies to selected services and not all services, unlike the GST. 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,” he said.

Using a can of soft drink as example, Lim said a manufacturer imposes a 10% sales tax (RM0.10) on the product manufactured for RM1.

Under the GST system, when the same can is sold at a 7-Eleven for RM2, a GST of RM0.12 would have been imposed, he said.

“It is clear that a 6% GST at RM0.12 would be higher than a 10% SST.”

Lim’s statement was issued to refute claims that SST would burden the people more compared to GST. He said the SST, to be implemented on Sept 1, would in fact “return” RM23bil to the rakyat with its projected collection of RM21bil a year, compared to the projected RM44bil from GST.

At the Parliament, former prime minister Datuk Seri Najib Tun Razak slammed the Government’s decision to re-introduce the SST.

Lim added that his ministry had undertaken a comprehensive SST review exercise with the assistance of tax consultants from accounting firm Pricewaterhouse Coopers (PwC).

He said PwC would help rationalise tax collection and reporting requirements to ensure that the SST would be even more efficient and less bureaucratic than the GST, or even the old SST system.

“PwC will ensure the SST imposed on Sept 1 will be simpler, less cumbersome and will 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,” he said.