The Malaysian Government implemented the 6% Goods and Services Tax (GST) starting today (1st April 2015) including on all goods and services consumed in the telecommunications sector.
GST is replacing both the current Sales Tax and Service Tax and is part of the government’s tax reform programme “to enhance the capability, effectiveness and transparency of the country’s tax administration and management”.
In a statement released to MalaysianWireless today, the Communications and Multimedia Consumer Forum of Malaysia (CFM) said that mobile communications services is a standard rated item under the Goods and Services Tax (GST Act) 2014, and since mobile communications services are neither GST exempt nor zero rated items, the industry is required to charge 6% GST charges.
CFM said that the 6% GST will also be applied on mobile devices such as tablets and smartphones, certain contents, applications, and other telecommunications products and services.
Effective today, the 6% Service Tax on postpaid services will be replaced by the 6% GST.
For prepaid services, Deputy Finance Minister Datuk Ahmad Maslan has said that price of prepaid reload coupons (top-up) will be maintained as GST will replace the previous 6% sales and services tax (SST). However, reload coupons from a number of Telcos were added with 6% GST and sold at a higher price today. The new prepaid reload pricing are as below:
- RM5 top up + 6% = RM5.30
- RM10 top up + 6% = RM10.60
- RM30 top up + 6% = RM31.80
- RM50 top up + 6% = RM53
- RM100 top up + 6% = RM106
Despite the Ministry of Domestic Trade, Co-operatives and Consumerism said that there won’t be any changes on the prepaid reload cost, the higher pricing with GST are being imposed by online banking sites such as Maybank2u, CIMB Clicks and retails stores such as 7-11 outlets.
According to a GST guide on Telecommunications Services released by the Royal Malaysian Customs in July 2014, the sale of prepaid reload coupons won’t be taxed for GST, however GST is chargeable when customers redeem the credit (when customers top-up on the phone).
“The prepaid phone card is a face value voucher for GST purposes and therefore the sale or supply of the prepaid phone card is not taxable for the purpose of GST if the consideration is less or equal to the monetary value. GST is chargeable at the point of redemption of the credit (airtime)” the Royal Malaysian Customs said in the guide.
Altel Communications is the 1st mobile operator to officially announce the higher prepaid reload cost to include GST. There were no official announcement regarding GST from other mobile operators, however prepaid reload coupons from Maxis, Celcom Axiata, DiGi (including online reload), Tune Talk, Clixster appear to have been priced higher to include GST today.
Historically, the Telcos such as Maxis, Celcom Axiata, DiGi (and others) have been absorbing the prepaid 6% sales and services tax (SST) for years at the request of the Malaysian Government. There have been a number of attempt by the Telcos to pass down the 6% tax to consumers prior to this.
While the law doesn’t allow the Telcos to absorb GST, the Telcos could restructure the prepaid reload value to include GST. For example, a RM10 prepaid reload will be sold as RM9.40 + RM0.40 GST (total price at RM10), and it could still carry a RM10 worth of airtime value. The Telcos are required to state both the retail price and GST amount to allow consumers to have a clear idea on what they are paying for.
The Ministry of Domestic Trade, Co-operatives and Consumerism urged consumers to lodge reports via its hotline (1800-886-800) and website if they have paid for the higher prepaid reload prices.
[Download PDF]– GST guide on Telecommunications Services released by the Royal Malaysian Customs
P.s: There has been confusion in the Telco industry regarding GST on prepaid reloads. We heard the key Telco players have yet to decide on this matter and will be meeting the Government tomorrow to discuss this matter.