Pikom sees short-term post GST impact on ICT sector
KUALA LUMPUR: The National ICT Association of Malaysia (Pikom) believes Malaysia’s information and communications technology (ICT) sector is still poised to generate RM95 billion in revenue by 2017 despite the initial slowdown due to the market’s reaction to the Goods and Services Tax (GST).
Like many other Asean countries that preceded Malaysia in the adoption of GST, the market would eventually accept the new tax regime as part of business costs and processes and sales would recover in the long term, it said in a statement today.
In adapting to the situation, Pikom chairman Cheah Kok Hoong advised ICT retailers to define their differentiations and competitiveness in the market.
“Besides trying to reduce internal costs through improving business efficiency or providing additional services to maintain their customer base, retailers are encouraged to consider leveraging on emerging and fast-growing ICT trends that are perforating the market and to position themselves strategically so they can benefit when the market picks up,” he said.
Cheah added that ICT retailers should also try to look beyond pricing and switch to higher-margin products and services such as value-added consultancy or offering strategic bundling or packages to complement sale of hardware and gadgets.
In sharing the outlook on the country’s ICT sector with the imminent impact of the GST to be implemented on April 1, 2015, Pikom disclosed that its survey on “GST Impact on Business” showed more than 60 per cent of local ICT organisations acknowledging that the GST would impact their revenue.
However, it does not see a great impact on purchasing and investment decisions by larger enterprises and corporates as the six per cent charged by suppliers can be claimed as input tax from the Royal Malaysian Customs Department (RMCD).
Due to the general uncertainties arising from the imposition of the six per cent tax on technology products (currently zero per cent under the Sales and Service Tax regime), Pikom expects price hikes across a large number of hardware, software and service offerings as rising cost is passed on to consumers.
The expected impact is likely to be an overall slowdown in consumer sentiment and ICT spending, most notably in the consumer retail segment.
Cheah said the next six months would see a general ‘dip’ in the purchases of hardware and gadgets such as smartphones, personal computer, laptops, printers and other peripherals by households and consumers. “We expect smaller companies, particularly small and medium enterprises, to be more affected by the GST with most delaying their ICT investments for now.
“Overall, we anticipate a drop of up to 30 per cent in the market,” he added.
However, for GST registered companies, the effect of this value-added tax is neutral as they can claim the input tax from RMCD as soon as they are charged by their suppliers.
“It is perhaps the mindset that requires changing and acceptance of such a tax,” he said, adding that the confusion and misconceptions of GST by the market especially among companies and consumers had been hopefully addressed to a certain degree with the continuous education and ‘roadshows’ throughout 2014.
However, there were still ‘grey’ areas that may require more understanding and rationalisation, he added.