GST and consumer power

Updated.

Almost one month has passed since the implementation of GST, has the cost of living gone up?

GST was successfully implemented in many countries and is perceived to be a useful tax to raise revenue for the government.  Protagonists will label it as a fair tax; you pay when you spend; the more you consume, the more you pay.  But if you are one of those living and working in the cities in Malaysia and earning a salary slightly higher than the minimal wage, you probably will be the one worst hit by this so called consumption tax and you will not welcome this.

Even though essential items are exempted from this tax, working persons will have no choice but to eat at least one meal outside. And if you eat a meal outside, you will definitely feel the effects of this tax on your pocket.

So far, I have come across three categories of businesses on how they deal with GST.

1. Many merchants have put out notices that they absorb GST. One prominent example is multinational company IKEA. There are notices in Ikea stating that prices remain as before. They must have a very comfortable profit margin to be able to absorb six percent of taxation. Anyway, as consumers, most of us would be happy to patronize these.

2. Many are charging more than six percent even though  on their receipt, it is programmed to read 6 percent. One example is those curry puff chain stores.  One of them  was selling curry puff for RM 2 per piece just before CNY.  After CNY, it was raised to RM 2.20, reasons being that the impending implementation of GST has raised cost and thus a 10 percent adjustment in price.  But then, come April first, the curry puff price went up to 2.40 , an increase of another 20 cents. Six percent GST on 2.20 would be 13 cents, so why increase it by another 20 cents? Why can’t they just sell it at 2.35 or even 2.30 , since they have already increase their puff by ten percent just a couple of months earlier? On the receipt, of course, GST reads exactly six percent of a puff which are now priced higher at 2.26.

A fried YaoCharKway (fried chinese doughnut or flour sticks) in uptown used to charge 40 sen per stick (the small variety type, not the normal long one available elsewhere). Now he is charging 50 sen per stick, an hefty increase of 25%. The reason is that as a small business, he can’t charge GST but have to buy raw materials which may be subjected to GST. So he has to pass on the increase. An increase of 25% no less, even though GST is only 6%.  It doesn’t matter that not all his raw materials are subjected to GST; flour and sugar are certainly GST exempted.

One of my favorite cafe at uptown Damansara raised its white coffee from RM 3 to RM 3.30 a cup, an increase of 10  percent, starting this month.  On top of that, GST is charged on the 3.30. Which means an increase of more than 16 %  on that cup of coffee. The reason given is again increase of cost of living due to the new tax. By their logic, the six percent GST  is causing the cost of living to go up 10 percent? These merchants must be either out of their minds or they are such good predictors of future that they could predict that there is a rise of cost of living of 10% due to the six percent of GST.  More likely, they are shrewd businessmen trying to make more profits using GST as a pretext.

3. This category did not use GST as an excuse to raise their prices, yet! They charge GST as GST should be charged– prices of goods purchased plus 6 %.  They did not have to absorb any cost, but they also did not go all out to profit from the pretext of an increase in cost of living due to GST implementation. Examples are plenty: many restaurants, most hypermarkets and supermarkets.

There are many other examples of category 2 merchants. Precisely because of these unscrupulous merchants , cost of living may go up higher than what it should be purely on GST taxation per se. Precisely because of there are so many category 2 businesses,  that we should have perhaps postponed the implementation of GST until people’s mentality changes to that of first world countries, or until such time when enforcement improves and profiteering can be cut down to a minimum.

In the meantime, what can we consumers do? individual Consumers are powerless, but together we can teach these cat2 merchants a lesson. If they raise their prices in addition to charging GST, like the examples I quoted above,  we should  all stop patronizing them. If we can do that, we will be sending a strong signal to these people that profiteering will not be tolerated.

Afterall, what are they without the consumers?

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P.S. There are of course the  rare ones that have lowered their prices. These outlets are so rare that I won’t even categorise them. One of them is this :

image

 

Please note that although this outlet has reduced its prices, they are still not cheap and would still be out of reach for the ordinary wage earners. Anyway, this act of reducing price is commendable and hopefully more outlets should take after this.

3 Comments (+add yours?)

  1. kampong lad
    Apr 27, 2015 @ 11:09:19

    any idea if the 3 categories esp the 2nd also existed in countries that implemented the regressive tax regime since malaysia is not the first? yes, if the gomen doesn’t have full control of the situations, just forget the gst. don’t simply pass the problem to rakyat in order to increase gomen’s revenue. legislators are wakil rakyat repeat wakil rakyat, the main responsibility is to protect and look after the welfare and interest of rakyat. they are not maharajas.

    Like

  2. Lai Kee Kong
    Apr 29, 2015 @ 22:10:20

    Ikea is not actually absorbing the tax. They were paying 10% SST before on the cost price. Now they pay 6% on the selling price.

    Like

  3. HY
    Apr 30, 2015 @ 23:45:00

    first of all hsu, hope u r doing fine.

    just curious, since some of your expenses went up bec of gst, would u not increase yr medical consultation fee as well?

    i notice many thing especially food price increase by more than 10% to 15%, i go to komugi n notice my fav bread surge rm1 to 5.5, i tell myself i must change my spending habit, for how long i dun know.

    Like

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