Zero-rated GST: Should you buy a new car now?

If there’s one constant in the aftermath of GE14, it is ‘change’. With the announcement by the government that the Goods & Services Tax (GST) will be zero-rated starting 1st June 2018, and in the absence of an implementation date of the Sales & Services Tax (SST) – reports indicate within two to three months when Parliament convenes – Malaysians will soon be enjoying a GST tax ‘holiday’.

Of course, the ‘downside’ of this announcement is that consumers are going to hold their purchases till June starts, particularly large ticket items such as automobiles, Birkin handbags and iPhone X-es. If anything, as long as the Kleenex and Maggi Mi supply doesn’t run out in the next 10 days or so, no person would want to pay 6% more unless it’s necessary. And that means the remaining days of May will be dire for certain businesses, particularly those with cash flow issues.

GST-zero discounts

While car companies scurry to issue updated price lists to ensure that the order books are being filled for eventual registrations from June onwards, some brands such as Proton, Honda, Nissan (and possibly a few more to follow) have already taken the additional step of absorbing the 6% GST from now till the end of May. We reckon it is mainly to stem deferments of vehicle deliveries which are supposed to happen within this month.

Whether it’s called a rebate or bonus, the absorption of GST is in effect a straight up 6% discount by car companies to reflect the forthcoming GST-zero prices, and this is on top of on-going promotions which are discounts as well. However, once GST becomes zero-rated on the 1st of June, we expect car companies to roll back the ‘GST discounts’ so that transacted prices remain similar pre- and post-June, or bear the brunt of angry customers. Do note that the purchase of insurance coverage for vehicles in the month of May would still attract GST, likewise accessories and related services.

Volkswagen’s latest prices in Malaysia, with effect 1st June 2018.

When should you buy?

If you’ve planned for a new car purchase this year, you might want to place a booking (which is refundable by the way) as soon as practicable given that a strong uptake in sales is anticipated, at least in the next couple of months before SST is put in place.

Manufacturers and distributors require lead time (usually more than three months) to raise production, be it CKD or CBU, so it’s not inconceivable that popular models may run out of stock before the tax holiday ends.

Till then, happy tax holiday but keep an eye out on the breaking news.


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