Success of SST hinges on enforcement, says tax expert

(MMO) – Enforcement will play a pivotal role in ensuring the success of the implementation of the Sales and Service Tax (SST) says Axcelasia Taxand chairman, Veerinderjeet Singh.

“Previously the enforcement was lacking during the implementation of the previous Goods and Services Tax (GST). Many businesses took advantage of this by hiking prices wantonly,” said Veerinderjeet at a briefing after presenting at the ‘Axcelasia Taxand’s SST 2.0’ seminar at Hotel Istana here today.

He said businesses added on the input tax to their cost of goods sold and this resulted in higher prices, adding that they were not supposed to do this as they are entitled to refund of the input tax.

“Another issue with the GST was that the taxing authority of the indirect tax was the Customs Department but the enforcement came under the Domestic Trade and Consumer Affairs ministry. There were weaknesses in the enforcement of the Anti Profiteering Act as a result of this dichotomy,” added Veerinderjeet.

He gave the example of the ‘tax holiday’ period for SST between June and August where prices had not really come down as a result of poor enforcement.

Veerinderjeet also cautioned that prices of certain goods will be higher post SST implementation in September as the rates for certain items under the sales tax was 10 per cent compared to the GST rate of 6 per cent.

However, he said the general prices of goods and services would be lower as SST only covers 38 per cent of the Consumer Price Index (CPI) compared to 60 per cent under GST.

“One way that the Domestic Trade and Consumer Affairs ministry could enhance vigilance on the unwarranted price increase was to employ staff who were well versed in accounting practice,” he said.

GST was introduced on April 2015. The Pakatan Harapan government had promised to abort the unpopular tax as part of its election manifesto.

The tax was aborted on June 1 and will be replaced with SST on September 1.