Uncertainty over car prices with GST

GST will pose a major challenge to the industry, but the scale of the impact on car prices remains unclear.

PETALING JAYA: The car industry is bracing for a major challenge in view of the government’s plan to impose 6% Goods and Service Tax (GST) by April 2015, but the impact remains unclear as far as car prices are concerned.

Kuala Lumpur and Selangor Car Dealers and Credit Companies Association head Khoo Kah Jin told FMT that the implementation of GST is likely to adversely affect the used car industry because used cars will now be subject to 6% GST.

He based his prediction on the fact that used cars was not named as one of the items exempted from the GST, as announced by Prime Minister Najib Tun Razak last Friday.

“It is very unfair; we are trying to appeal against the decision to impose GST on used cars. When a car is produced, it is already taxed for all kinds of duties.

“Now it is put on sale for the second time, why must we pay GST again?” he said.

He said the affected car dealers cannot even pass the GST cost to the consumers, for it would only reveal its profit margins on the vehicle to consumers.

“We are studying the case of used car industry of neighbouring countries after GST is imposed. Later we will put forward our suggestions to the domestic trade ministry,” he said.

Cheaper cars with GST?

Malaysia Automotive Association president Aishah Ahmad said it remained unclear whether the prices of new cars are going to go up or down in 2015.

Najib said the GST is set to replace the 10% sales tax and 6% services tax. The automobile industry is subject to the 10% sales tax and excise duty currently.

Yesterday, Minister in the Prime Minister’s Department Idris Jala said the government is not going to abolish the excise duty when GST is implemented.

Aishah said one possibility is that GST will make cars cheaper because the 6% rate is lower than the current 10% services tax.

However, when asked if each segment of the supply chain in the car industry would be taxed, she said it remained unclear.

“I haven’t had a discussion with my council members. So I can’t tell you,” said the association president in representing Land Rover Sdn Bhd.

By Leven Woon