MCMC: Mobile prepaid services not exempted from 6% GST

Telcos and GST
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IA - TIME

If you’ve been confused, uncertain and somewhat baffled by the implementation of the 6% GST on certain goods and services, then you’re not alone. There has been plenty of confusion and misinformation on the new tax and has also recently caused a stir amongst mobile service users, specifically in the prepaid service segment.

Do consumers pay or not pay?

According to the Consumer Forum of Malaysia (CFM), established by the Malaysian Communications and Multimedia Commission (MCMC), a meeting was held between the Customs Department and telco players – Celcom, Digi, Maxis and U Mobile yesterday to clarify on GST implementation for prepaid services. Several issues were addressed and key items were agreed upon.

“I have been briefed by the celcos on this matter. From the beginning, communications services have not been included in the list of items which are exempted or zero-rated from GST, which means that consumers will have to pay GST for these services. This includes prepaid reloads,” said Dato’ Sri Dr Halim Shafie, Chairman of the Malaysian Communications and Multimedia Commission.

Mobile communications services (excluding international roaming) is a standard rated item under the GST Act 2014, which is neither GST exempt nor zero rated items (indecisive much?), the telco industry is required by law to charge 6% GST.

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Reloads for prepaid are hence subjected to GST, upon activation. The value of the reload is identical to pre-GST, and the only difference is that the GST is added to the reload amount. E.g. RM10 reload + 6% GST = RM10.60 paid to cashier.

The telcos heed the Customs call that consumers are feeling the pinch of the GST for some items, including prepaid services.

And therefore, as a transitional measure, the telcos have agreed to give all customers who reload RM5 and above, a value which is higher than the GST addition — in forms of free talktime and SMS.

For instance, a customer will get 5 voice minutes and 5 SMS for every top up of RM10. With reloads of RM20 on the other hand, the customer will receive 10 voice minutes and 10 SMS. This will apply for only three months, starting tomorrow 3 April 2015.

The telcos and Customs are committed to work closely in the implementation of GST and to seek ways to develop more affordable packages for the rakyat, This is expected to be announced in mid-April.

While it seems like a temporary plug, the move is, if it’s any consolation, at least definitive. That should put speculations and rumours about GST implementation for prepaid services at bay, for now.

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