Cheaper cars after GST? Nope very unlikely says MAA. File pic.

Cheaper cars after GST? Nope very unlikely says MAA. File pic.

Delaying your intention to buy car until after the implementation of Good and Services Tax is prudent.

However if you are hoping for cheaper car prices after GST implementation. You would be disappointed, at least that what Malaysian Automotive Association predicted.

The association said it was “incorrect” to assume that car prices would be reduced simply because the current 10% sales tax would be replaced by a 6% GST come April 1 next year.

Unlike sales tax, MAA said GST was a transaction-based and a multi-stage tax imposed at each stage of business transaction.

“This means GST is levied on the supply of goods and services at each stage of the supply chain, from the supplier up to the retail stage of the distribution,” it said in a statement.

“Under the GST system, there will be a different implication to businesses in various areas ranging from tax computation, collection, refunds, re­­con­­­ciliation, costing and such when compared to the existing sales and services tax regime.”

MAA said vehicle distributors would need to review their entire cost structure and supply chain in the light of these implications.

“The impact will be far greater for those who are handling locally assembled vehicles. This is because generally there are thousands of parts and components used to make up one locally produced vehicle.

“Vehicle distributors would then need to assess each and every one of their vendors and suppliers to ascertain their tax position,” it added.

Currently, not all vendors and suppliers have sales and service tax.

The association said car prices were determined by car companies after taking into consideration various factors and market forces.

Any price reduction, it said, could also be a seasonal incentive offered by car companies themselves to customers at a particular season or period of time.

The association’s view on car prices and GST clashes with that of the Ma­­laysian Automotive Institute (MAI), which predicted a drop in car prices between 1% and 3% after the implementation of GST.

MAA had conducted a price simulation to determine how vehicle prices would be impacted by GST.