KUALA LUMPUR: The list of zero-rated and exempted items under the goods and services tax (GST) is “too long and troublesome”, said Deloitte Tax Services Sdn Bhd managing director Yee Wing Peng.
“The government should be firmer and keep the list of GST-free items short,” he told a news conference at the one-day Deloitte TaxMax Budget Seminar here yesterday. Comprising over 900 items, Malaysia’s GST exemption list is said to be the longest in the region.
Yee said a long list means that there will be less revenue collected by the government, while businesses will also find it difficult to comply with the new tax regime. “We have too many items with different GST treatment. It could be very troublesome for businesses and confusing for consumers. I hope the government can streamline the list,” he said.
Yee cited New Zealand where all products are subject to GST on one single treatment, while in Singapore, financial services are among the few items that are out of the scope. He went on to say that petrol should be taken out from the GST exemption list as it could encourage smuggling, particularly to Thailand and Indonesia, two of Malaysia’s neighbours that have imposed the value-added tax on petrol.
RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon concurred. “We have to decrease the number of items in the GST exemption list,” he said.
Meanwhile, travellers can expect prices of domestic flight tickets to increase after the consumption tax is implemented, although some airlines may absorb the extra cost on certain routes depending on their respective pricing strategies, said Deloitte Tax Services tax director Wong Poh Geng.
That’s because air tickets for domestic flights will be subject to GST of 6% come April next year, while air tickets for international flights have been classified zero-rated.
“Currently, air tickets for domestic flights are not subject to sales tax, so it is likely to cost slightly more [post-GST],” she said. “The law states that it is a must to charge GST, but who’s paying for it is another issue. You may collect it from the customers, or you may absorb it. That is solely your choice based on [your] business strategy,” she said.
Wong is of the view that the 6% GST rate is relatively minimal compared with other countries, and that most people are still willing to travel. “The test for the airlines is, when you charge GST [on the airfare], are the people willing to pay for it? If they do, then it’s fine.”
This article first appeared in The Edge Financial Daily, on October 21, 2014.