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No more fumbling over coins. Prepaid Reloads will be exempted from GST

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When GST came into effect on 1st April, Malaysian consumers were up in arms over the extra 6% charge on prepaid reloads. There was mass confusion as Deputy Finance Minister Ahmad Maslan retorted that there shouldn’t be any price increase. The fact is prepaid services should have been taxed with service charge which the telcos have been absorbing all these while. There’s no running away from GST as even postpaid users have always been paying the extra 6% tax on their monthly bills.

After taking charge of the prepaid reload issue, Communications and Multimedia Minister, Datuk Seri Ahmad Shabery Cheek has finally announced a solution which would hopefully put the matter to rest.

Buy RM10, get RM10. No GST on reload

The minister announced that all prepaid reloads will not be imposed with GST. So if you buy a RM10 top up, you’ll get RM10 value with no extra charge upon purchase. However that doesn’t mean prepaid is free from GST. Instead the 6% tax will be charged only upon usage. Essentially this is similar to buying shopping vouchers at the supermarkets and you’ll only be charged GST upon purchase.

So what’s the difference?

You can’t avoid GST but this implementation is actually fairer to consumers. Currently consumers are paying GST upfront even before the service is being used. Furthermore not all mobile usage would attract GST charges, for example usage overseas for roaming internet and calls are actually exempted from GST.

In the current system, prepaid users would have already paid GST when they roam as the 6% tax was already paid upfront regardless of what you plan to do with your credit. Nope, there’s no refund as All GST are paid the moment you top up.

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UPDATE: For GST on roaming using prepaid, Digi, Maxis and Xpax mentions that GST will be refunded. In Digi’s FAQ it states that users will be notified of the refund the next day while Xpax shall rebate back at the end of the day in Malaysian time. Whereas for postpaid users, data or voice calls during roaming would be GST exempted and you only pay GST for taxable usage when you receive your bill.

The only impact is that your mobile rates would increase by 6%. So a typical 10sen/minute would be charged at 10.6sen/minute and RM10 service add-on for data would cost RM10.60. At least it is fair that you only pay upon consuming your credit.

However the biggest question is whether or not the telcos would round up the extra 6% charge. Because if they do, you’ll end up with less credit in the long run (e.g. Being charged 11 sen instead of 10.6 sen). Currently our local banks are charging GST for its services and they round up the 10 sen Interbank GIRO charges to 11 sen inclusive of GST.

When is this taking place?

The ministry has given telcos 6 months to comply with the latest change and they urge them to lower down their rates to minimise the impact of the cost increase. Currently some prepaid players have taken some steps such as giving free calls or credit. One of the notable initiatives we’ve seen so far is from TuneTalk where they give free RM10 credit if you top up RM30 and free RM20 if you top up RM50.

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What do you guys think? Will this end the GST prepaid debacle once and for all?

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