The National ICT Association of Malaysia (PIKOM) shared its outlook on the country’s ICT sector with the imminent impact of the 6% Goods and Services Tax (GST) which is to be implemented on April 1st 2015.
Due to the general uncertainties arising from the imposition of the 6% GST on technology products (currently zero percent under the Sales and Service Tax regime), PIKOM said that it expects price hikes across a large number of hardware, software and service offerings as the additional cost is passed on to consumers. The expected impact is likely to be an overall slowdown in consumer sentiment and ICT spending, most notably in the consumer retail segment.
PIKOM Chairman Cheah Kok Hoong said, “We estimate that the next six months will see a general ‘dip’ in the purchases of hardware and gadgets such as smartphones, PC, laptops, printers and other peripherals by households and consumers. We expect smaller companies in particularly Small and Medium Enterprises (SMEs), to be more affected by the GST with most delaying their ICT investments for now. Overall, we anticipate a drop of up to 30% in the market.”
The ICT Association recently conducted a survey on “GST Impact on Business”. Results showed that more than 60% of local ICT organisations acknowledged that GST will significantly impact their revenue.
However, Cheah mentioned that PIKOM does not see a great impact on purchasing and investment decisions by larger enterprises and corporates as the 6% charged by suppliers can be claimed as input tax from the Royal Malaysian Customs Department (RMCD); assuming that these companies are GST registrants (the exemptions to this ruling whereby input tax can be claimable are the GST Exempt industries).
It is important to note that for GST registered companies, the effect of this value-added tax is neutral as they can claim the input tax from RMCD as soon as they are charged by their suppliers (in a valid Tax Invoice). It is perhaps the mind-set that requires changing and acceptance of such a Tax.
“Besides trying to reduce internal costs through improving business efficiency or providing additional services to maintain their customer base, retailers are encouraged to consider leveraging on emerging and fast-growing ICT trends that are perforating the market and to position themselves strategically so they can benefit when the market picks up,” shared Cheah.
He adds that ICT retailers should also try to look beyond pricing and switch to higher-margin products and services. This includes value-added consultancy, ancillary services such as free delivery, user training as well as offering strategic bundling or packages to complement sale of hardware and gadgets.
PIKOM believes that despite the initial slowdown due to the market’s reaction to GST, Malaysia’s ICT sector is still poised to generate RM95bil in revenue by 2017.