News reports claiming that new locally-assembled cars will be exempted from the upcoming 10 percent sales tax are not true. According to a press release by the Royal Malaysian Customs Department, the document titled ‘’Proposed Goods Exempted From Sales Tax" uploaded to the official Customs site has been erroneously interpreted by many local news sites.
Section 87.03 on the document includes a clause that says Completely Knocked Down (CKD) vehicles are exempted from sales tax.
Earlier reports by MalaysiaKini and The Sun Daily, which has since been corrected, had based their reports on the document, claiming that prices of new locally-assembled cars will not see any increase post-SST implementation on 1-September 2018.
The Customs Department clarified that the items exempted from SST on the said list only refers to knocked down kits that are for completely knocked down (CKD) packages.
At this point, we need to clarify that the definitions of CKD and CBU used in policy papers are different from consumers’ understanding. CKD here doesn’t necessarily mean locally-assembled cars, but imported components and kits used to assemble a vehicle.
Obviously sales tax cannot be imposed at this level as that would result in double taxation of the vehicle – at plant’s assembly level and at point-of-sale at the showroom, hence the exemption on CKD cars.
In short, the clause merely says that unfinished cars are exempted from sales tax, only finished cars that are sold will be slapped with the 10 percent sales tax.
It should be noted that the exemptions listed under Section 87.03 have been around for decades, since the pre-GST era.
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