- Since the zero-rating of GST that became effective on June 1, many instances of price inconsistencies have been reported by Malaysian netizens on social media.
- Despite the expectations for prices to come down, there have been many stories of businesses still retaining the same prices or even raising them higher than before.
You run a business that makes a profit off selling things to people. It could be food, it could be furniture, and it could be toy cars or even spare parts for real cars. But regardless of what it is you trade in, the way our social connections run—with news and stories traveling as quick as lightning through social media—means that no business is exempt from the watchful eyes of consumers everywhere.
This is no exception in urban Malaysia, where our tax system has just recently undergone a significant change with the reducing of GST to 0%.
Following the change that was officially implemented on June 1, there was as expected many social media posts by Malaysian consumers who had encountered businesses that seemingly did not adhere to the switch—some still choose to charge a 6% GST, while some others have even raised prices higher than before.
With all this happening, two big questions then remain: if GST is reduced, shouldn’t prices logically come down? And if prices should come down, why are there still so many inconsistencies?
Here are a few reasons we can think of that explain why this is.
1. Teething Problems
Considering that many businesses these days rely on certain systems (electronic or otherwise) to keep track of inventory and pricing, it wouldn’t be surprising if a number of them happened to make some sort of mistake when adjusting their prices to accommodate for the zero-rating of GST.
From making software adjustments to streamlining price structures across multiple outlets, the probability for error does exist. This so happened to be the case with Spanish eatery La Bodega in Bangsar, where they blamed a huge difference in menu item prices (a jump of about 20% after the reduction of GST) on a glitch in their system.
Now, while we can’t really tell for sure how genuine or truthful their explanation is, the fact of the matter is that a price discrepancy so huge can only do nothing but raise alarm bells. As expected, complaints were made and they were appropriately called up by Malaysia’s Ministry of Domestic Trade, Cooperatives and Consumerism (otherwise known as the KPDNKK) for questioning.
2. It Was Just Coincidence
For some other businesses, it appears as if the zero-rating of GST has unfortunately coincided with their plans to also mark up their prices.
For a variety of reasons, many businesses have found it difficult to live with the rising costs of things like ingredients, manufacturing materials, and logistics and shipping, and have thus found it absolutely necessary to bump up the prices in order to balance the books and keep afloat.
Some business owners have had to come out and explain their situation on their social media channels, such as in the case of PJ-based cake house LeTrianon who explained on their Facebook page that due to price hikes for ingredients and packaging materials, they bumped up their prices just as GST was reduced to 0%.
3. No More Absorbing GST
In 2015, the arrival of GST forced many a business owner to make a decision: add in GST into the price of products and risk losing the competitive edge, or absorb the cost and keep the customers coming back.
Many businesses chose the latter and maintained the prices of their products.
These businesses are now choosing to take it as an opportunity recover some of the revenue that they sacrificed over the past couple of years. Think of it as something similar to a price hike, but with prices just staying the same and not going up.
4. Just Bad Behaviour
And of course, while many businesses have legitimate reasons for not adjusting their prices to reflect the zero-rating of GST, there are some other businesses that have simply chosen to ignore the changes and simply not do the right thing.
From outright refusing to get rid of the extra 6%, to marking up prices to values higher than before, the majority of these questionable practices are in direct violation of the guidelines set by the KPDNKK and can be reported through the following channels:
- KPDNKK Consumer Hotline: 1800-886-800
- Through KPNDKK’s mobile app on iOS or Android.
- Via email at: email@example.com
- Through their online complaint portal.
- At any KPDNKK office or branch (check this link for a full directory).
If for whatever reason a business has yet to make the necessary adjustments, the KPDNKK will be offering a grace period of until June 30 for business owners to make the appropriate changes to their pricing, during which they will also be making inspection checks on Malaysian businesses to ensure ethical price changes on the part of business owners.
- If you’re interested to know more about this topic, read our article on the misconceptions Malaysians have about GST and SST here.
Feature Image Credit: Investvine