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Prepaid Calls/SMS/Internet pricing to increase 6% with GST in 6 months

Minister of Communications and Multimedia, Dato’ Sri Ahmad Shabery Cheek recently announced that prepaid reload pricing will soon retain its face value, for example, a RM10 reload will cost RM10 to purchase. However consumers will still need to pay for 6% Government Service Tax (GST) when prepaid services including data/Internet, voice calls, SMS are used. This means GST is applied to the individual transactions when customers use their airtime.

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The changes are expected to be implemented in about 6-month. At the moment, all prepaid reload pricing will continue to cost more with 6% GST. For example, RM10 reload value is sold at RM10.60.

In a joint media statement made by the Communications and Multimedia Consumer Forum of Malaysia (CFM) yesterday, it said that the telecommunications industry (Maxis, Celcom, Digi, U Mobile, Tune Talk & others) supports the Government’s decision to apply goods and services tax (GST) only upon usage of prepaid services.

CFM, a national organisation created in 2002 to protect the rights of consumers, said the new methodology will form the foundation for application of GST on all electronic payments such as e-wallet and mobile wallet, which has become increasingly ubiquitous in our growing digital economy.

However, it is still unclear on how the Telcos plan to implement GST on certain usage. For example, it cost 1sen/SMS to all Friends and Family via Digi prepaid, excluding GST. There’s also the rounding mechanism which the Telcos would need to implement with GST.

Implementing the new change is a massive effort which is expected to take more than half a year to complete. The decision to change the basis of charging GST from activation to usage is not as simple as an on/off switch, CFM said. It involves complex reconfiguration of the telcos’ backend systems as well as those of over 30,000 third party retailers, resellers and agents such as financial institutions, electronic payment providers, supermarkets, petrol stations and all other sales agents. However, in line with the new direction announced yesterday, the telcos are committed to do their best in delivering the new implementation in 6 months.

The industry had been in consultation with the Royal Malaysian Customs Department (RMCD) since 2014 to ensure necessary measures are in place for the implementation of GST. It had spent almost a year configuring its backend system in preparation for full compliance to GST implementation on 1 April. The principle of 6% GST on price of products and services, which are not exempted or zero-rated, is a standard application across industries and was applied to reload value upon agreement with RMCD.

Implementation of 6% GST have received heavy criticisms from prepaid consumers since 1st April. Federation of Malaysian Consumer Association (Fomca) secretary-general Datuk Paul Selvaraj said that the GST charges for mobile prepaid users should be absorbed by the government instead.

“Let a RM10 top-up card be RM10 (in value),” he said.

Paul told theSun that the government should be looking into lessening the consumer’s burden because most of the people who are using pre-paid cards are from the lower income group.

About Kugan

Kugan is the founder of MalaysianWireless. He has been observing the mobile industry since 2003. Connect with him on Twitter: @scamboy