GST oh GST

Last week, as Pakatan Harapan took over Putrajaya after winning the GE14, Malaysians started to “wait and see” on how and when they are going to make good of their promises in the election manisfesto. One of it is to abolish the GST.

The business at most car showrooms almost stalled as customers are expecting OTR to be reduced as a result of the abolishment of GST. In anticipating the GST to be replaced with the previous SST, most OEMs issued statements potraying the the OTR will increase.  Current GST is at 6 percent while the old SST was 10 percent.

The announcements were made to encourage customers to return and to resume their purchase and forget about “wait and see” attitude.

On 17^th May, the Ministry of Finance (MOF) issued an official statement saying that the GST will be zero rated from 1^st June 2018. This is indeed a good news, both for sellers and buyers. All the earlier statements by OEMs are now obsoletes as government is silent about the SST. The OTR will definitely be cheaper in the absent of the 6 percent GST. But, the not so good about the announcement was, the effective date of the zero rated GST will be on 1^st June, and the statement was made on 17^th May. That is another 13 days to go. What will happen to May’s business result then?

On the following day, MOF issued another statement that the GST will definitely be replaced with SST, but short of saying when and how much. OEMs are in panic state on how to manage business in May. Proton was quick to announce that they will offer rebate on  GST amount with service voucher for purchases made from 18^th up to end of May (later this was amended to include option for total cash rebate as well). Other OEMs started to publish new prices from June onwards (without GST).

Perodua too, has issued a statement about the impact on OTR with the reinstatement of SST earlier on. This, was later superseded with a new announcement of Instant GST Rebate less than 24 hours after the first statement. The new offer will see Perodua subsidizing the GST amount (on average, about RM2500 per car) to all registration done from 18th up to 31^st May 2018. This is a very costly exercise to Perodua but just like other OEMs, it has to be done in order to spur the business back in May. Otherwise, many of Perodua dealers will suffer from stalled business, lots of accounts will be aging and stocks will be piling up to wait for the return of customers from 1^st June onward. These 2 weeks gap, if not properly handled, can lead to much bigger problem to the eco-system later.

As we speak, customers don’t have to wait until June to buy Perodua cars, as they will enjoy the same benefit and no need to worry about the 6 percent GST. But, even if they cannot take delivery this month, they still have June to enjoy (or until the reinstatement of SST, which have yet to be announced by the government).

For me, this is the moment that we have been waiting for. It is the rare Tax Holiday. Zero tax. The car prices are at its lowest level (to some brands who are offering the GST rebate now) and will continue to be at that level until the SST is reintroduced later.