25 March 2015

[GST] Car Prices will Drop? (March 2015 Update)

It's been hotly speculated by all Malaysian since the day one goods and services tax (GST) being announced. Malaysia being one of the highest car ownership country in the world, anything to do with car prices definitely will become the nation's topic. Here, we look at this topic as a whole with the latest updates:


Why everyone speculating that car prices will drop?
Currently, there is a 10% vehicle sales tax on each vehicles sold. With the implementation of GST, which is charging 6% as announced, this will replacing the existing sales tax. In other words, the 10% sales tax will be abolished on April 1. A straight-forward calculation means there is a saving of 4% effectively.


But, that's not the case.
Practically, we need to take into considerations below factors also:
  1. Logistic costs which subject to 6% GST
  2. Currency fluctuation for imported cars or components


Based on current situation where Ringgit keeps on depreciating in value, it will definitely increase the import cost. That's why after some estimation, it will be 2% - 3% cheaper only for Japanese car, but even a more expensive European or US imported cars. Are you going to buy Japanese car because of this reason?


How about those cars which already paid the 10% vehicle sales tax?No worry. The Customs said they will reimburse the 10% sales tax once car dealers produce documented proof that they have paid the tax but had yet to sell the vehicle as at 31st March. So, all the new car prices could be standardize and become cheaper because of this after 1st April.

How about second hand car?
For used cars, it will still subject to GST but the calculation is a bit different. The GST will only be imposed on the dealers based on the profit from a sale. In another term, we called this as "margin scheme". For example, if a used car dealer buys a car from an individual with RM100,000 then sells it out for RM150,000. The GST will applies on the profit of RM50,000 only.

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