Reduce GST rate to 3pc: FSI
Published on: Thursday, October 08, 2015
Kota Kinabalu: The Federation of Sabah Industries (FSI) urged the government to reduce the GST rate from six per cent to three per cent and increase the threshold from RM500,000 to RM3 million as the current tax regime is too heavy and oppressive to small companies.Its President Datuk Mohd Basri Abdul Gafar (pic) said the government is in a position to do so (reduce the GST rate) given its unexpected windfall from tax revenue receipt versus forecast which hovered at RM50 billion.He said the government's decision to impose GST at six per cent was too high and hard on Malaysian businesses, especially in Sabah where the cost of doing business is already too high.
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"Malaysia's GST at six per cent may be the lowest among Asean countries compared with 10 per cent in Indonesia, Vietnam, Cambodia, the Philippines and Laos and seven per cent in Singapore and Thailand."But Malaysian and Sabah businesses would be more receptive to a gradual increment, starting with three per cent," he said during a press conference here, Wednesday.In fact, FSI Honorary Life President Datuk Seri Wong Khen Thau had earlier proposed that GST be implemented at different rates with six per cent in the peninsula and three per cent for Sabah and Sarawak due to the differences in companies' strengths in the three provinces.Nonetheless, Basri said even if the two-tier system could not be implemented, gradual increment of the GST rate must be considered.
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Singapore, he said, is a fine example that adopted gradual GST implementation, starting with three per cent on April 1, 1994, increased to four per cent on Jan 1, 2003 and to five per cent a year later, and its current rate of seven per cent on July 1, 2007."It must not be forgotten that many small businesses had opted to close shop ahead of GST implementation date, being overwhelmed by the cost and complexities of complying with GST.
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"Since its implementation this year, businesses that had chosen to stay, especially small and medium enterprises (SMEs), have been burdened by a host of compliance problems and its related costs which effectively compounded the already high cost of doing business in Sabah," he said.On average, said Basri, a company must spend more than RM1,000 a month just to ensure they comply with all the requirements as well as to do all the extra works that come with the submission of audit reports to the Customs Department.The Customs Department also is not ready to fully implement the system and many companies are made to wait for more than three months for their claims of refunds to be processed despite the provision stipulated in the GST Act that refunds will be made to the claimant within 14 to 28 days, causing serious cash flow problems for businesses."Yet, the government demonstrated high level of efficiency when it comes to penalising 'errant' tax payers. Taxpayers claim unfair that they are penalised for no fault of their own, claiming the Customs Department was unsure of the guidelines themselves."The government either does not have the answer, provides inconsistent answers or dispense the wrong answers to GST-related queries, which led to wrong entries by businesses. This scenario is akin to the blind leading the blind," he said.For example, he said, noodle, which is a type of food, could not be determined whether it should be zero-rated or taxed and the department differed in its responses, saying it is zero-rated at one time and taxable at another.Businesses also claimed that the GST guidelines keep changing and that there are too many codes and businesses were forced to exercise their discretion in matching the codes with products, given the circumstances."The penalties for these 'errors' purportedly committed by taxpayers are hefty, about RM5,000 per error, and these are an added burden," he said, adding that the government should go easy on GST penalties and to conform to the 14-working day refund policy to ease the burdens of SMEs.He said greater flexibility and business-friendliness on the part of the government would be helpful to the SMEs and especially at a time when inflation has crept up upon consumers for the first eight months of this year to 1.9 per cent seriously impacting their purchasing power and livelihood of the average consumers."Wholesalers and retailers reported drop in sales of between 20 and 30 per cent during the same period. "The declining ringgit had only compounded the problem for both businesses and consumers alike. With inflation, higher import cost, reduced domestic demand and declining production activities and reduced exports, the government must step in to help the SMEs," he said.In terms of increasing the GST threshold from RM500,000 to RM3 million, Basri said this call warrants a realistic look at Sabah's businesses.Sabah has 40,643 SMEs, the majority of which are 'micro' numbering 31,295, 'small' at 8,128 and 'medium' at 1,219."Using the RM3 million threshold, more SMEs, specifically the small SMEs, will be relieved of the GST burden and this will help pave their way for growth and continue to contribute to the state economy."Sabah SMEs, constrained by high costs of operation, are not ready for GST as yet," he said.Practically speaking, he said, a RM500,000 annual revenue means only about RM40,000 a month or about RM1,000 per day. Deducting the overhead and other costs, company owners are barely surviving especially in Sabah.Stay up-to-date by following Daily Express’s Telegram channel.
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