Companies operating in certain industries may face increased competition
and margin pressures pursuant to the implementation of the goods and services
tax (GST) next year.
The industries categorised as “GST tax exempt” and
mainly dealing in the final business-to-consumers supply chain, would have to
decide whether to pass the increased input costs in order to protect their
margins.
“The concept is that you can only claim (input taxes
refund) if your charging is taxable, which is either 6 per cent or 0 per cent
(for the zero-rated category),” the director and trainer at the GST Academy,
Manmohan Singh, told StarBiz at the sidelines of the Morison AAC International
Seminar on the GST Implementation yesterday.
“Once your charging is exempt then you cannot claim
the input tax and this would mean increased business costs.
“They will have two options, to either maintain their
profits or facilitate a cost-plus mechanism. For these industries, it remains
to be seen if market forces would be one of the major influences in shaping
their decisions as well,” Manmohan added.
The industries under this category mainly belong to
the services segment of the economy such as financial, education, childcare,
healthcare, mass transportation (including bus, water, taxis and rail),
funeral, burial and cremation services.
Residential land or building, agriculture land and
general use land, accommodation, tolled highway or bridge, supplies made by
societies and similar organisations that are free are also considered “tax
exempt”.
Meanwhile, at his presentation at the same seminar,
Morision AAC’s Australian-based corporate director Greg Hayes said that certain
industries mainly in the retail sector might see consumers increase their
purchases a few months prior to the GST implementation on the notion that there
could be cost savings.
“People may look to take short-term advantage before
the GST decision. This will have a positive impact and there may be a surge in
business in the period leading up to the implementation date,” he said
“We may get a slight temporary change in business cycles.
After six months of the implementation in Australia, it then normalised
thereafter.
“This happened on the notion that things would
eventually get more expensive,” Hayes added.
On the same matter, Manmohan said that the same
experience also happened in Singapore where the retail segment saw a mini-boom
in consumer spending in the four to six months leading to the GST
implementation there.
“There is a lot of fear factor involved as what had
happened in Singapore. There was fear among the consumers as they did not know
how much prices would increase by and they kept on spending leading to a boom
to buy washing machines, televisions etc.
“But after April 2015 there may be a sudden slowdown
for the next few quarters. This is the unintended impact of this scenario,” he
said.
Daniel Khoo
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
No comments:
Post a Comment