By Mohd.Ariff Sabri bin Hj. Abdul Aziz, MP for Raub, Pahang
Why will the price of goods increase after GST? Will there be inflationary effects, i.e. a general rise in the price of goods and services?
Parliament yesterday rushed through an important bill that affects the lives of the majority of us. Many of us who registered to speak on the policy stage did not get the chance to speak because the speaker limits the number of speakers. And since we rejected the bill in its entirety for a second reading there were no debates at committee stage.
It is clear in the case of the bill pertaining to GST, the government plans to rush through. They did. they came in full force fearing if they didnt, the opposition may outvote then. Minus the ones who are not in the country and are sick, 81 of us opposed the bill.
Even the withdrawn PM was in parliament yesterday. BN had the superior numbers, courtesy of the technical victory they obtained in GE13.
We who represented the 53% of those who actually rejected BN in GE13, opposed this GST Bill. We will continue to explain to the people, why GST is anti people.
We all know the reason why GST is rushed. The government has run out of money. We will regret the day when parliament approves to place more money in the hands of a government that has no fiscal prudence in its vocabulary.
Will the price of goods increase? They will. Its unlikely that transactions along the supply chain will be smooth. There will be stock build ups. Sellers will impute holding costs if they cannot sell as fast as they want. There is also an element of risk to be factored in. the government says it can settle the tax claims within 14 days. Now they say they can. In practice they cannot. Delayed time means cost. All these will be factored in.
Then, please abandon this illusion. Sellers don’t sell at cost plus GST. If they buy at RM100, GST at 6% is RM6, they won’t sell at RM106. They may want to sell at 200 or 300. Unless the government implements a anti-profiteering law. Then what level of profit is considered fair and what level isn’t fair? The government says its pro-business right?
There will be. When prices go up, they are unlikely to come down. So I am not sure what Ahmad Maslan means, there will be initial price increase and then stabilise. Stabilise means go down before GST? He cited a number of goods that will not change in price? Are these price-controlled items? As to the goods that go down in price, I am not sure which type.
If you look at the basic model in the GST economy you will notice a flow of goods from the wholesaler to the retailer to the end consumer.
When the wholesaler buys good x- say a TV, he pays an input GST which he can claim from the government. Let’s say he buys a TV set RM100. He pays an input GST of RM6. (6%). When he sells to the retailer, he charges output GST which he remits to the government. He is the collecting agent.
The price he sells to the retailer is not cost price plus 6% GST. Why should he do this? He doesn’t sell at RM106. He sells at a price he wants to make a certain profit. It does not matter if he sells for example at RM200. He has been transparent- he declares he bought at RM100. He and the government know, the input GST is RM6. He has told the truth. The government accepts he has told the truth.
When he sells at RM200, he will pay the output GST of RM12. No problem there. He is transparent. The government accepts he is transparent. The government announces it’s a transparent transaction. There is no law to say he cannot sell at RM200 so that he makes a RM100 profit.
The retailer buys at RM200. He pays input GST of RM12 to be claimed against the government. Retailer wants to make a RM300 profit. So he sells TV at RM500. Since he is GST registered, he charges the end consumer GST. He charges an output GST of 6% of RM 500. That is RM30.
The output GST he collects on behalf of the government is RM 30. No problem there. He has been honest and transparent. He has declared he buys the product at RM200. He and the government know the input GST. He now wants to sell at RM500. There is no law that says he cannot sell at RM500. He does not have to sell at cost plus input GST i.e. RM200 + 12. (212). He wants to sell at RM500. That is legal. He declares this and sells at RM500. He wants to make a profit of RM300. He and the government know he has collected output GST of 6% x 500= RM30.
The end consumer buys at RM500. He pays GST of 6% which is RM30. That is his input GST. He is not GST registered. He does not sell out to anyone else. He pays RM500 plus RM30 GST under the illusion that all along, honest and transparent transaction from the wholesaler to the retailer to him has taken place.
The original price of RM200 has in the end become RM500. Perfectly legal. So the definition of honesty and transparent in a business transaction is to declare as it is. The government doesn’t judge to say, the profit margin of RM100 (wholesaler to retailer) is exorbitant. The govt does not judge to say the profit margin of RM300 (between retailer and consumer) is unconscionable. That’s not important. The important thing is, each stage in the supply chain has declared honestly and transparently how much they bought and how much they sell.
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1. wholesaler
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2. Retailer
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3. End-consumer
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End consumer is not GST-registered. Therefore, he cannot claim GST paid on his purchase from govt.
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