KUALA LUMPUR, Jul 19 – The Sales and Services Tax (SST) will cover only 38 per cent of the Consumer Price Index (CPI) basket of goods compared with the 60 per cent from the Goods and Services Tax (GST).
Finance Minister Lim Guan Eng said the implementation of the improved SST would ‘return’ to the people RM23 billion in taxes collected which would ease their financial burden, especially those affected by high living costs.
“At the same time, the government hopes the addition of the RM23 billion returned to the people will spur private consumption as well as reassure investor confidence, which in turn will stimulate economic growth,” he said during the Ministers’ question-and-answer time in the Dewan Rakyat today.
The finance minister was responding to Datuk Seri Dr Wee Ka Siong’s (BN-Ayer Hitam) who wanted to know whether the implementation of the STT would result in price increases and the steps taken to ensure the tax would not burden the people.
Lim explained that STT would be a ‘single-tax’ which, in general, would be imposed on manufacturers and not consumers, whereas the GST, as a ‘multi-stage tax’, resulted in every stage of the supply chain being taxed.
“Technically, at each level of sales, suppliers can apply for a refund on GST paid as an input tax from the government. However, this process became a big problem to the cash flow of many companies as the previous government was tardy in processing GST refunds.
“This resulted in an increase in the cost of business which was borne by consumers in the form of higher prices for goods and services,” he said. When met later at Parliament lobby, Lim said the inefficiency of the GST refund process has resulted in companies considering the GST as an additional cost to their operations.
“If 100 per cent efficient, with fast payment, this would not be a problem,” he said. Lim, however, admitted that GST was a more efficient taxation system and the effect from the price increase due to GST should not be very different from SST but weaknesses in the GST system resulted in people suffering.
“GST is an efficient system for the government but a burden to the people. The impact from STT will be half of GST, which will be in line with the government’s efforts to reduce the people’s burden,” he said. Lim also said enforcement by the Customs Department and other agencies needed to be improved to prevent tax evasion and profiteering.
“We aim to have an improved SST that is transparent and efficient. In the long run, we hope to see lower cost of living and improved economic growth. Despite the removal of the GST, the government is confident this year’s fiscal deficit target will be met. For next year’s budget, I will table it to Parliament on Nov 2,” he added. — Bernama