The Malaysian Insight

TRADERS are expecting better sales and profits as the end of the unpopular 6% goods and services tax (GST) has brought prices down for popular household items and processed food.

But merchants dealing in fresh produce, such as fish, chicken and vegetables, said prices have remained mostly the same in the past six weeks as they are determined by farm supplies and market demand.

However, the drop in prices was slight unlike what has been claimed by Pakatan Harapan Minister Salahuddin Ayub, who said prices have dipped by 30% to 50%.   

The decrease, from disposable nappies to canned creamer and sardines, is only one aspect with which traders are happy.

They told The Malaysian Insight that the end of the tax has had the psychological effect of loosening consumer’s wallet, leading them to spend more compared with the past three years when the GST was in effect.

Seven of 10 merchants in a TMI straw poll in Sabah, Sarawak, Penang and the Klang Valley said prices have gone down by at least 6% after the GST was zero-rated on June 1.

Some said the decision had a cascading effect where the prices of certain goods came down by up to 10%.

“The prices of bread and other bakery products like cakes and buns have dropped by from 20 sen to 30 sen,” said Agnes Tugong, 32, runs her family’s village grocery shop in Lundu, about 100km from Kuching city.

“Not all the prices have come down, only certain consumables,” said Tugong, adding that large bottles of Coca Cola are now RM3 instead of RM3.60.

“But instant noodles, biscuits, canned food and other soft drinks – their prices have not dropped as expected.

Another Kuching trader, Richard Spencer John, said he noticed that food prices have come down by between 6% and 10% in the city. 

“I am saving around that on basic food,” said the 59-year-old who sells animal feed.

Businessman Wilson Kan of Kota Kinabalu Sabah, said prices for electrical goods, books and household cleaners have come down. Food prices at some restaurants have also come down.

“But the kopitiams are still keeping their old prices. I don’t know why they are not reducing their prices.”

Weather influence  

Economists have said there will be a marginal drop in prices for certain consumer goods after June 2 when retailers stop passing the tax on to shoppers.

However, the prices for fresh and unprocessed food are expected to remain the same as they were not taxed.

Yet on June 15, Salahuddin, who is agriculture and agro-based minister said prices of foods had decreased by 30% to 50%.

He later clarified that this was based on his observation and the feedback from traders at the pasar tani he has visited. 

Zulfadli Mohd Ismail, who sells vegetables in Shah Alam, said prices of some of his stock has risen despite there being no GST.

“The only items where the price is stable are tempe and tofu. Everything else depends on farm output. Production depends heavily on the weather,” said the 32-year-old who has a stall at the city’s Section 6 wet market.  

“For instance, long beans this month went up to RM12 per kg from RM7 about a month ago. Because when it rains constantly, farmers can’t get their stuff out on time and it rots.”

Other produce cost more or less the same with sawi and kangkong going for RM1 per bunch while red chillies are RM12 per kg.

Fishmonger Zainuddun Ismail, who is in the same wet market, said the price of seafood was not influenced by which political party was in power.

“The ones that are caught in the wild, such as kembung and mambong and squid, no one can control,” said the 51-year-old, adding that the prices were influenced by supply from local and foreign fishermen.  

Kembung is between RM16 and RM20 per kg depending on size. Squid, which is usually RM15 to 16 per kg, is now RM34 to RM37 this month.

Too early to tell   

Some retailers are expecting to see better profits, as they no longer have to absorb the 6% tax. These are the micro enterprises who make less than RM500,000 annually and are unable to pass the tax to consumers.

“I now get my stocks cheaper by 6%, without having to pay GST. I have maintained my old price. I didn’t increase it when there was GST,” said Steven Loh who sells local snacks in George Town, Penang.

“So with GST, I just made less money. Now I can make 3% more, maybe,” said the 54-yea-old when met at the Chowrasta market.

In Sabah, grocer Nikkie Stephen, said orders for fresh produce in the rural interior areas have picked up since the start of the month.

“Sales are now much stronger there compared to urban areas. Previously, RM5,000 in sales was hard to get, but now reaching RM8,000-RM10,000,” said the 40-year-old. 

“Those in the interior now have better orders. The orders have improved on a monthly basis.

“I think this is largely the psychological effect of the zero GST. As consumers think that the GST is removed, things have gotten cheaper.”

But despite the initial optimism, many of those interviewed said it is too early to tell whether the initial burst in sales will result in better business in the coming months.

“It will take longer to see whether doing away with GST will improve business and people’s lives,” said Loh.

“The economy hasn’t been very good since 2014 and people have been used to paying GST while tightening their belts because their salaries have not gone up much.

“I think we will have a better picture in another six months or so.” – July 9, 2018.