Monday, February 6

GST to have minimal effect on car prices – institute

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KOTA KINABALU: There is no need to wait for the implementation of Good and Services Tax (GST) before buying a car, said Malaysia Automotive Institute (MAI) chief executive officer Madani Sahari.

“With the implementation of GST, if there is a reduction in the price of cars it will be at the very minimum of 1 – 2%,” Madani said to the press at the Chit Chat with CEO of MAI in Hyatt Regency Kinabalu Hotel here yesterday.

According to Madani, 60% of Malaysians would sell their existing cars to acquire some capital in order to get a new car, coupled with the average depreciation in the value of cars with each passing year the move to wait does not make sense.

“Seriously, people have been asking me if they should wait for the implementation of GST before buying a car. I tell you, no need to wait just to buy a new car at 1 – 2% lower in price. It doesn’t make sense,” he said, adding he does not foresee a problem in the purchase and sales of cars with the looming GST.

Madani revealed that the overall average car price has been reduced by 4.97% in 2013 and by August, this year it has been dropped a further 4.4%.

“We are hoping to reach the 5% reduction by end of this year. Every year there is a target to reduce car prices. It is one of the government’s manifestoes to reduce car prices gradually.

“It is not immediately because they are simply too many negative impacts if it were to be reduced drastically,” said Madani who added that the gradual reduction is implemented from 2013 to 2018.

“We don’t want it to have any impact on our second hand cars, on the cars you are driving now or the book value of the cars.

“That is why it must be done gradually and it is a work in progress. We hope that we are able to achieve this target by 2018,” he reiterated.

Madani also said that the implementation of GST in April next year would have its pros and cons on the supply chain.

“The principal of the taxation system does not increase cost. On one hand the existing sales tax paid by consumers will be reduced from 10% to 6% with the implementation of GST, which is a good thing for consumers.

“GST, a tax incurred across the supply chain such as the vendor or supplier, manufacturer and dealer, does not guarantee the profit but should improve the cash flow of a business. Every level in the chain must ensure that the business fundamentals are correct in order for the business to be efficient,” he said.

“If you are not effective you will experience a negative impact. So cash flow will improve provided that you manage your business fundamentals properly, such as through management of stocks.

“Keep stocks at a minimum and sell it as soon as you can,” he advised.

However, he said MAI would take into account the distance location-wise of Sabah and Sarawak. In order for the GST to not impact badly on the businesses in Sabah, they will continuously study solutions and discuss with relevant companies to explore solutions which will solve the issues.

“This is something we have to think for Sabah and even for Sarawak. GST is five months down the road, I don’t have a solution at this point of time.

“The solution has to be very customised to the guys that are bringing in these components and parts into Sabah and we have to discuss with them.

“Then only can we mitigate this input tax against the output tax which will only happen after they sell their products but rest assured we will do something about it,” he said..

Madani also revealed that a long-term solution to the problem could be done with the implementation of a spare part retail centre in Sabah.

He said MAI is currently at the planning level to implement this in Sabah, which would prove to be a good business spin-off in the state.