SST: What We Know So Far
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If the news of the upcoming Sales and Service Tax reintroduction, often referred to as SST, has you stressed out – know that you aren’t the only one in the bear pack feeling anxious!
Moreover, with the deluge of inaccurate articles and possibly biased opinions surrounding the issue of SST, it’s completely understandable to feel completely in the dark!
So to help shed the light on SST in general, as well as how this tax might affect banking products like credit cards, etc., we’ve prepared a quick guide for you.
What is SST?
You may or may not remember it, but the SST was the consumption tax in place before the introduction of GST in April 2015.
According to finance minister Lim Guan Eng, the new SST which is slated to be reintroduced on the 1st of September 2018, will cover a smaller range of items as compared GST.
The Sales Tax, rated up to 10%, will be imposed on selected or taxable manufactured and imported goods.
But since it is levied on the manufacturer, the consumer won’t see the 10% on their bill, they might feel it though.
On the other hand, the Service Tax is rated 6% and will be imposed on the rendering of professional services and others.
This includes the services provided by lawyers and accountants, among others. The consumer should see this 6% figure on their bill.
More details will be confirmed once the SST bill is tabled in parliament in the coming weeks.
GST vs New SST: What’s the difference?
There are a few important differences between these two types of taxes. Let’s take a closer look to see how they vary:
The GST came at a flat rate of 6% on all taxable items, while the Sales Tax has different rates of 5% or 10% depending on the class of good, etc. The Service Tax rate is 6%.
Whom it affects:
The GST was applied at every level and paid by everybody, where each level of production and retail could claim tax credits; all except the consumer. The SST is charged to the manufacturer and consumer, and there are no tax credits.
With SST, fewer items are taxable whereas under GST, almost all items (except for the essentials) were taxable.
So…will the SST cause prices to increase?
This is certainly a muddy question to answer, but let’s try.
In general, the prices of selected goods and services are likely to increase – when compared to pricing during the ‘tax holiday’ period (1st June to 31st August, 2018).
However, if we are looking at the prices of goods and services during GST, it’s very possible that the SST has little effect.
Some even believe that marginally lower prices are possible as well with the SST.
The government has also stated that since the estimated tax collection under the SST is about 50% lesser than GST, it SHOULD NOT (theoretically) be as or more burdensome to the public.
Also, when considering price increases, note that it will depend on many other factors apart from the new tax situation.
But what about the scary 16% tax we are hearing so much about?
Well, that is fake news or major confusion – either way you won’t be paying 16%.
What Goods and Services are affected by the new SST?
It is not 100% clear at present which goods and services could be subject to major price hikes, and which will be exempted, as the list is still in its proposal stage.
For now, international airfare under Malaysian Airlines Berhad said that it will remain unchanged if SST applies the same exemptions as before the GST was introduced.
It was also announced that essential items would be exempted from the SST.
These include foodstuff like potatoes, butter and grains, as well as other necessities like medicine and orthopaedic aids.
Also, since the SST implementation is supposed to keep things affordable for low-income groups; even the sale of motorcycles is proposed to be free of the Sales Tax.
Items that may be subject to the 6% Service Tax, apart from the professional services mentioned, include; satellite or cable TV subscriptions, employment agencies, hotel services and insurance, etc.
Exemptions for the Service Tax include medical consultations and ambulance services, among others. Here’s more information about Service Tax from the Customs Department.
What about banking products?
For now, the proposal for credit card Service Tax is set at RM25 for principal and supplementary cards, upon the next renewal.
However, this fee is lower under the new SST (for principal cards) than what the previous Service Tax imposed, which was RM50 for principal and RM25 for supplementary cards.
Under the GST, there was no service tax imposed on the credit cards.
But there was a 6% GST imposed on your card’s annual fees as well as on the charges for cash advances, additional statements, sales draft retrievals, card replacements and others.
Debit cards however, are not subject to the SST.
How does the SST affect you?
While the real-world effects of the SST implementation remain to be seen, it’s important to note that this tax is meant to be less burdensome than the GST.
As the government is expecting to collect a smaller amount of tax when compared to GST collections, it can be reasoned that the public should enjoy greater savings.
But of course, this is not always the case as certain unscrupulous businesses could take advantage of the situation and hike up prices unnecessarily.
Thus, it’s a good idea to keep an eye on the rough pricing for the items that you frequently purchase and be sure to report them if you notice a heavy price surge after the SST has been implemented.
Ensure that you continue saving on your banking products, whether or not the SST causes an increase in price, by researching and comparing your options.
This way, you’ll be poised to discover the most affordable products available, and using our comparison tool is the easiest, fastest way to do so!