Penjana Economic Recovery Plan: Up to 100% sales tax exemption on cars

Effective from 15 June until 31 December 2020
Honda Civic Type R FK8R
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Expect cheaper cars in the coming months as the government announces sales tax exemptions as part of the Penjana Economic Recovery Plan, as delivered by prime minister Muhyiddin Yassin on Friday.

The MYR35 billion short-term Economic Recovery Plan is the fourth of the six-phase 6R approach (Resolve, Resilience, Restart, Recovery, Revitalise, and Reform) in weathering the challenges of the COVID-19 pandemic.

With the sombre climate in the automotive sector, the government is introducing a MYR897 million initiative designed to boost new car sales.

It entails 100 per cent tax exemption on locally-assembled (CKD) passenger cars and 50 per cent tax exemption on fully-imported (CBU) models. This will be effective from 15 June until 31 December 2020.

For CKD vehicles, this effectively means the current sales and services tax (SST) of 10 per cent is zero-rated. This tax holiday is similar to when the six per cent goods and services tax (GST) was abolished in 2018.

Meanwhile, SST for CBU models will now be halved to five per cent.

We can expect price revisions in the coming weeks, but it is still too early to tell if cars will be drastically cheaper. If the 2018 tax holiday is any indication, we may see price reductions of between 3-5 per cent—this could amount to a couple of hundred ringgit or tens of thousands in real world savings depending on make and model.

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As an example, the 2018 Proton Saga 1.3 MT Standard cost MYR3,874 less with zero-rate GST in effect. On the other hand, one could save up to a whopping MYR18,072 when buying the CBU Honda Civic Type-R (FK8R).

A couple of hundred or a thousand, given the current climate, is still savings, and I reckon, will benefit both consumers and car makers in the short term.

For key highlights of the Penjana Economic Recovery Planread this post.

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