Where is the benefit of zero-rating the GST?

THERE is a reason why the new government has asked restaurants and retailers to continue with the inputting of the goods and services tax (GST) receipts into their cash registers. It is from finding out that after it had zerorised the GST charges, the drop in prices was not being felt by all quarters of the public.

It has been reported that 30% of mamak restaurants have raised their food prices despite the GST having been zero-rated since June 1.

However, it is heartening to know that 70% of shops have not and there has been an overall drop in prices by retailers after the GST was done away with.

The understanding when the GST was cancelled was that there should be a universal reduction in prices by way more than the 6% GST rate. The reason for the outcry before was that a lot of outlets had raised prices by more than 6% due to cashflow issues. They had to pay the government for the 6% they received but had to wait for some time to collect the 6% on a squaring-off process that was not efficient.

Hence, that is why prices were increased by way more than the GST rate. Now, what needs to be disclosed is just how much the public has benefitted from the abolishment of the GST.

If consumers do not receive the full benefit from the reduction in the GST, it would mean that businesses have pocketed the difference. There has always been a concern that businesses would do that and based on the data released by the government, it would appear that this is exactly what has happened. Essentially, the government and consumers would have lost out at the expense of businesses.

The one way to ensure fairness is to make sure that those businesses are fully punished for their profiteering.