GST refund delays to blame too for higher prices as businesses passed on costs to consumers: Lim

PETALING JAYA: Delays in refunding claims for the Goods and Services Tax (GST) to businesses led them to passing on the costs to consumers, resulting in higher prices of goods, according to Finance Minister Lim Guan Eng.
The GST is a multi-layer tax that goes through several stages of the supply chain , whereas the yet-to-be implemented Sales and Services Tax (SST) is a single-stage tax imposed on the manufacturer.
Lim said today the multi-layer nature of the GST saw each supplier factoring in the delay in reimbursement at every level, resulting in an increase in the final price. The longer the supply chain led the higher price increase.
"Technically, each supplier can claim back GST as an input tax from the government. Nonetheless, this still causes a huge problem with operating cash flow for many businesses as the (former) government has been notoriously slow in refunding GST claims," he explained at a press briefing at Parliament.
Lim said he will reveal the real reason for the previous government's failure to make refunds promptly on a later date.
The Customs Department yesterday released its list of proposed goods for exemption under the SST regime, of which about 98% is expected to be adopted.
K-Konsult Taxation Sdn Bhd managing partner Koong Lin Loong explained that the key items for business include the standardisation of the threshold for registration under SST which is set at RM500,000 annual income, compared to the GST which had varying thresholds for different industries.
Professional services for example previously had no threshold. Now it has been standardised at RM500,000.
Small services will also no longer be charged service tax.
Koong also opined that the cost of doing business under the GST was higher due to software and compliance expenses.
On the transitional period to the new tax system for businesses, Lim said there are bound to be problems and issues related to adjustments, urging software providers to not take advantage of the situation and charge exorbitantly. He has enlisted the Customs Department to assist in the transition period.
Lim noted that the government is still on track to achieving the fiscal deficit target of 2.8%, despite a narrowed revenue base, by curbing government spending.
On making the SST more efficient and transparent than the GST, he said there is a need for the Customs Department and regulators to ensure compliance to prevent tax evasion.