Advertisement

Financial impact due to implementation of Sales and Services Tax (SST)

101 Views  ⚫  Asked 4 Months Ago
asked on Jan 14, 2020 at 16:01
by  
edited on Apr 30, 2020 at 23:52
 
I am sure all of you are aware that the Sales and Services Tax (SST) has been implemented on 1st September 2018 to replace the existing Goods and Services Tax (GST) 

The above change may have been welcomed by many of the public but I would like to share with you my situation.

My company has been successfully awarded a contract prior to the 14th general election and one of the clause stated in the contract:

"The Subcontract Price shall not be adjusted to take account of any increase or decreases in the costs of completing the Subcontract Works or complying with the Subcontractor’s obligations under this Subcontract resulting from or as a result of a change in the Laws of the Country (including the introduction of new Laws and the repeal or modification of existing Laws) or in the judicial or official governmental interpretation of such Laws whether before, on or after the date of the Subcontractor’s Offer."

The implementation of SST has greatly increased our supplied cost which now the client declined to pay us the addition cost incurred. 

Your view on the above is very much appreciated.

Thank you.
0 had this question
Me Too
0 favorites
Favorite
[ share ]
4 Answers

answered on Jan 14, 2020 at 19:23
by  
The implementation of SST has greatly increased our supplied cost which now the client declined to pay us the addition cost incurred.

If the tax reduced, you don't need to reduce price for your client.
Looks fair. What is the problem?
0 found this helpful
Helpful

answered on Jan 15, 2020 at 09:40
by  
edited Apr 30, 2020 at 23:48
 
Hi @Jebat,

The problem is we tendered the project based on RM XXX (exclude GST). So regardless the government increase or reduce the tax (GST scheme) doesn't affect us. Example:

Contract price
(a) Supply and install xxxxxxx for RM1,000

Scenario 1 - Our cost from supplier is RM500 + 6% GST; we claim to the client based on contract price RM1,000 + 6% GST 

Scenario 2 - Our cost from supplier is RM500 + 0% GST; we claim to the client based on contract price RM1,000 + 0% GST

Scenario 3 - Our cost from supplier is RM500 + 10% SST; we are unable claim the addition SST incurred based on the contract terms. 

For scenario (1) & (2), the GST input and output tax would be consolidated and pay the extra to the government.

However, there is no way for us to recover the SST for scenario (3) as we are not registered i.e. manufacturer, etc and we are suffering badly in that I mean millions of ringgit.. 
1 found this helpful
Helpful

answered on Jan 15, 2020 at 10:43
by  
edited Apr 30, 2020 at 23:50
 
@Joslang

Most businesses carry a higher risk especially so for imports. I had my fair share during in the construction line. During the period 1994-1998, I had signed forward orders for millions in contracts. When the Customs raised the tax structure from 25% to 40% suddenly, my Joint Venture business collapsed beyond redemption within 6 months. There is no legal recourse having self study on various laws.

Come to grip with reality and live on with life.

The main issue was that in those days we did not put exchanges rates plus tax changes in Customs Duties/Taxation in our Contracts to repudiate it or for arbitration. Even our GREAT PETRONAS Malaysia lost BILLIONS in oil revenue due to this issue. "WE" Bad..!!

I can understand and feel your frustrations better more than anybody else (in this forum)..!!
1 found this helpful
Helpful

answered on Jan 16, 2020 at 19:38
by  
"The Subcontract Price shall not be adjusted to take account of any increase or decreases in the costs of completing the Subcontract Works or complying with the Subcontractor’s obligations under this Subcontract resulting from or as a result of a change in the Laws of the Country (including the introduction of new Laws and the repeal or modification of existing Laws) or in the judicial or official governmental interpretation of such Laws whether before, on or after the date of the Subcontractor’s Offer."

Why did you sign this contract?
0 found this helpful
Helpful


You must log in to answer this question.

Not the answer you're looking for? Browse other questions by category or search to find answers.