Does Telcos taking advantage of GST to increase prices?

PETALING JAYA: Telecommunication (telcos) providers have taken advantage of the implementation of the Goods and Services Tax (GST) to charge consumers a tax it has been absorbing the last 20 years, in a move to defray potentially millions in costs.

According to a source familiar with the matter, telcos have always absorbed the 6% service tax imposed on reloads for prepaid cards.

It is understood, however, that with the implementation of GST, a number of telcos have taken the opportunity to add it on to reloads sold, despite being told that they should maintain the prices as per the norm.

The GST in this case though is not charged on the reload which is essentially a cash voucher and therefore a non-taxable supply, but the equivalent is added into the price of the reload.

Altel, Digi and Maxis are a few companies which have clearly stated that its reload prices for prepaid cards now come with the GST.

Customs today had said that of the 7 cases it is investigating following numerous complaints from the public, four involve telcos and the indiscriminate increase in its reload prices, in contradiction with the government's assurance that prepaid service prices will be maintained.

Communications and Multimedia Consumer Forum of Malaysia (CFM), designated to protect the rights of consumers of that sector by Malaysian Communications and Multimedia Commission (MCMC), in its statement today said that the GST Act 2014 and the classification of mobile communications services as a standard rated item, means that prepaid services which include the prices and corresponding airtime for SIM packs, starter packs and reload coupons are subject to the 6%.

For postpaid services, the 6% service tax has been replaced by the 6% GST. For prepaid services, the prices and corresponding airtime for SIM packs, starter packs and reload coupons are maintained, CFM had said in its statement today.

"However, as per the GST Act 2014, telcos are required to charge 6% GST on top of these prices. The 6% GST is collected on behalf of the government in accordance with the GST Law and guidelines for all goods and services consumed," it added.

All international roaming services are not subjected to GST as the government has classified international roaming services provided by all Malaysian telecommunication as zero-rated supply.
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