GST profit-margin restriction draws mixed reaction

The restriction on businesses against raising their profit margin upon the Goods and Services Tax (GST) implementation has received mixed response from industries which felt that the government should instead monitor the prices closely from the initial supply chain.

Royal Malaysian Customs Department GST director Datuk Subromaniam Tholasy was reported as saying that traders should not mark up their profit margin three months before and 15 months after the GST enforcement, cautioning them that such action would be tantamount to profiteering.

He said the imposition of the restricted period was aimed at curtailing unscrupulous traders from marking up prices to get higher profit margin.

"Why must we always think that the costs would go up (upon the GST implementation)? There is also the possibility of prices coming down. We want retailers to keep their net profit margin", he told Bernama.

Subromaniam felt that the electricity tariff cut from March 1 to June 30, 2015 should lower production costs.

Commenting on the restriction, Brahim's Dewina Group of Companies business development and marketing director Ahmad Husaini Hassan said goods brought in by importers should be controlled as any changes in the prices would affect the whole supply chain.

"We would agree (to the restriction) if the government were to go after importers who under-declared taxes, as they have potential to raise the prices (factoring in the GST initial price).

"In fact, by doing this, the prices will be cheaper. We (supply chain and consumers) will thank (the government) for that," he told Bernama, adding about 50% of raw materials used in Brahim's products were imported.

On the contrary, Subromaniam said such a problem would not occur as importers too had to register for the GST to claim the input tax.

Malay Businessmen and Industrialists Association of Malaysia (Perdasama) president Datuk Moehamad Izat Emir commended the Customs Department for curtailing industries from raising the profit margin three months before the GST implementation.

"This would provide retailers with a cooling off period to enable traders to be mentally ready for any profit or loss.

"However, restricting industries from raising profit margin till 15 months after executing GST needs to be studied and discussed," he said.

Poh Kong Holdings Bhd executive director Ermin Der Ming Siow viewed the restriction as 'unfair' as this was against the Competition Act 2010 as companies were operating in a free market economy, allowing them to fix prices.

He said the move was not business friendly as companies had to deal with fluctuating costs of raw materials and logistics such as transportation and labour which were beyond their control.

"Retailers are holding back their profit margin at the moment," he added. – Bernama, February 23, 2015.