Monday, March 23, 2015

GST: Thank you BN for bringing prices down by 10%? 4%? Thank you for getting rid of many 'kedai runcit'?

More shops closing down because of GST...

Do you think that all the products that are in shops have already been paid for by the said shop owners? The answer is 'NO'..

Many of the smaller businesses, when they receive products for their shops - they really do not pay the supplier or the factories the monies for the said product. The deal is that 'we will try to sell' - and if we do sell, then we will pay for it. If we do not sell, then we will return. 

For items with expiry dates, the supplier will usually take them back and replace it with new products. There are other forms of arrangements reached. Part-payment, payment by some form of installments, etc ...

Now, when it comes to GST, the assumption is that when the products reach the shop, it is 'purchased', and at that point at time, the shop/retailer is expected to pay the 6% GST to the government - and, of course, they can claim back later if the product is not sold, etc ...but the problem is that this 6% payment is a lot for the smaller shops/businesses...

For GST, new systems have to be put in place - the POS, the Point of Sale and Retail Management System - with also the necessary software for the GST documentation and computation - One retailer told me that the government said that it will cost about RM4,000 - but when he checked, the cheapest was about RM8,000 and the best was about RM15,000. I checked with a computer shop, and they said the whole thing would cost about RM10,000 (Was this using 'pirated copies of the software' or inclusive of the actual cost of the software?) - well, for the smaller shops, this is BIG expense - and worse still, is the cost of having to hire people to handle this new software - a new staff (Why? Because many a small business people usually do not have the necessary computer, etc skills...). So, what will the cost of the new staff - RM2,000 per month? 

Small business are very simple operations - Get the products from the suppliers for a price - sell the product - calculate the income, pay the relevant income tax >> Now, it becomes complicated...

An additional task calculating GST - and adding to the cost of the product for sale to the customer. And keeping record of all these sales - even when one is a sundry shop dealing with many small items... 

So, it is not a big shock that many small retailers/businesses are just choosing to quit - stop their businesses - and this affects consumers.[See also:

Sundry shops run by elderly closing because of GST? 

Lim Eng Kooi di kedai runcitnya yang terletak di Jalan C.Y. Choy, Pulau Pinang. Beliau akan menamatkan perniagaannya kerana beberapa faktor, termasuk pelaksanaan GST. – Gambar The Malaysian Insider oleh Hasnoor Hussain, 20 Mac, 2015.

 

 

 

 

 

 

 

 

 

Banyak kedai tutup kerana GST...di kawasan Temerloh juga

Unlike the big supermarkets, many of these smaller businesses were customer-friendly and maintained a good relationship with their customers. They kept prices as low as they could - and also sometime out of kindness for the people that had difficulty not only gave 'price-cuts' but also sometime even gave them time to make payments - maybe when they got their pay. Now, many of these outlets are shutting down ... {Many of these retail outlets like sundry shops already suffered with the entry of those big supermarkets and hyper-markets - they still continued on and never really made 'big profits' - just enough usually for a reasonable life - and also a sense of loyalty to the customers that they served. Many survive also because they already own their establishments - and they save by not renovating, painting, etc - It was also not profits that they were concerned with but merely a way of life - or something to occupy their time and maintain their social life in their old age, etc... and now, thanks to GST - this part of Malaysian life will be extinguished. 

GST and pricing? 
For an item priced at RM1, when the factory or manufactures deal with them, they deal with large numbers - say 1,000 and for this the GST would be RM60. 

Now, at the retail shop, a customer buys a single item - and because of GST, the price will be RM1.06 - so, since 1 sens are really gone - the item will now be sold at RM1.05 (retailer loses) or maybe RM1.10 (customer loses). Would it not have been better that the 'old system' was done, where the taxes are collected at the point of origin, where this 'taxes' will all be considered as cost of production and will be reflected in the pricing of the goods? It matters not for at the end of the day, it is the customer that pays these taxes - but certainly more simple if the GST taxes are collected from the point of origin. 

Controling pricing and profiteering?

Fixing the price of chicken at the market -   very "impressive' - but are they also fixing the prices the suppliers/middle-man sells to the chicken seller at our markets? Are they also fixing the price that the chicken farmers sell to the supplier? Are you also fixing the prices of chicken feed? >>> Well, it seems that they only fix the prices at the markets - so, only these people suffer...

Is this fair? Likewise, still not looking at the controlling prices elsewhere but only looking at the last point of sale - the retail shop? 

GST - A big 'thank you' from manufacturers, producers and importers? 

No more will they be burdened - but will they reduce the cost of products by 4% - Why? before 10% taxexs incorporated into prices - and now reduced to 6% by GST - so prices should really be down by 4% overall... for the consumer?

And now all prices of products from 'manufacturers, producers and importers' will reduce by 10% - but will it happen? Yes, it should because earlier prices were hiked up 10% because of the sales tax - so when no more sales tax - prices of goods/products will all drop 10%...

GST - A big thank you from bigger shops/retailers - thank you for getting rid of our competition, those sundry shops, etc... 

The focus of the government has been the CONSUMERS - but alas, there are other victims - many of them people we know and are part of our community - the sundry shops, the hardware shops, the 'petrol station', the .... (look around and see which shops are closing in your community)... 

GST OK - but determine the sum at the point of origin and incorporate it already into the price of products as it was done with sales tax, etc before...

So, who has benefited because of this GST so far?

* Well - those who are selling the POS and the required instruments, programs, etc >>> a very big market indeed considering it all the shops, etc all over the country....big money?

* Government - enforcement and fines >>> how many people have been fined and how much have the government collected this time from the 'smaller business people'? [Should not be happening - but was it also good time for 'bribe taking'?]

* Those accounting people, company. businesses doing the TRAINING,...maybe even providing the services required monthly for preparation and submission of documentation relating to GST

* Bigger businesses - well it has finally got rid of quite a number of the smaller competitions - and certainly will increase my customers.

Who has lost because of GST?

* A lot of smaller businesses - retail/sundry shops, etc [These are people - with no more regular income > will there be repercussions? Many of them are older people here - so the chances of getting jobs is extremely slim....]

* Workers - yes, when such businesses close - their workers also lose their jobs - wonder how many - a million? Wonder how many are migrant workers too - why these workers cannot change their employer - so loss of job will also mean 'get out of Malaysia'...

* Consumer - we lost choices - we lost the benefit of 'competition' - we lost 'friends' and places that were not just shops but also a place where we can 'chit chat' and meet up with friends...

* Cultural loss - yes, we are losing a valuable component of our Malaysian way of life >>> 

* When business closes down - also landlords lose out, and other land lords also lose out because with so many shops closing the cost of rental(value of property drops) goes down... it would also impact TNB, Water Providers, Indah Water, TM, etc - no one at the shop - then no need electricity, water, etc... 

Should businesses be benefiting by a reduction of 'business income tax' rates? NO - definitely NOT... why should they, for after all, it the consumer that ends up paying GST - so, why reduce income tax rates for businesses.





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