KUALA LUMPUR: The automotive industry has lauded the government's move to fully exempt sales tax for locally assembled cars, and halved the sales tax for imported cars to 5% (from 10%) from June 15 to Dec 31, 2020.

The move was announced by Prime Minister Tan Sri Muhyiddin Yassin in his address to the nation today on the RM35bil Short-term Economic Recovery Plan.

This will result in cheaper cars, and higher demand for cars from buyers wanting to capitalise on the tax holiday, which was seen when the previous Goods and Services tax (GST) was zero-rated for three months in 2018.

Based on car price tags with zero-rated GST in 2018, car buyers stand to see significant savings.

For example, a Proton Saga (Premium AT) which costs RM39,800 and Perodua Myvi (AV grade) which costs RM54,090 might see prices lowered by around RM2,500 to RM3,000.

A Honda HR-V (V grade) priced at RM118,800 may be cheaper by RM6,500 while a BMW 320i Sport sedan priced at RM248,800 might see a reduction of around RM14,000.



Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the sales tax incentive will "certainly help to boost car sales, and helps the efforts of car dealers who have been coming out with various incentives and promotions for buyers."

Aishah pointed out that the automotive industry was presently going through a difficult phase, as "people are hesitant about buying cars."

She also said it was still too early for MAA to revise upwards its 2020 total industry volume (TIV) forecast of 400,000 units.
"This sales tax exemption might push the TIV above our forecast, but it is too early to say."

UMW Toyota Motor president Ravindran K also said the sales tax incentive is good news for the automotive industry.

"The full savings will be passed on to customers. With the tax exemptions, we will be making the relevant adjustments to the retail prices of all our models and apply them by June 15," he said.

Mazda vehicle distributor Bermaz Auto Bhd's general manager of marketing Lee Ai Hoon said, "This will help us to recoup our losses experienced during the Movement Control Order."

Mercedes-Benz Malaysia president and CEO Dr Claus Weidner said car sales nationwide suffered greatly through the MCO and the current conditional MCO.

“As we enter the recovery phase (of managing the Covid-19 pandemic), we must grow, learn and be better than before as the automotive industry went through a very challenging period.

“We welcome the government’s decision to implement sales tax exemptions on new CKD (completely knocked down) and CBU (completely built-up) cars as this will help further create demand and stimulate car sales, ” he said.

Ryan Habibullah, 32, found the tax incentive timely as he and his wife had been looking to buy a new car to welcome their first-born in October.

“With this announcement, there is no better time for us to do it than now. We may even consider buying a foreign brand, ” said the digital content employee.

Calling it a nice surprise, private investor Ooi Ban Chew, 49, said that despite most people being cautious about their spending, the sales tax boon would help to boost consumption and stimulate the automotive industry, which had experienced poor sales in the last few months.

Used imported car dealer Eugene Lee, 25, said those who were holding a high stock of imported cars would face challenges because the prices of cars would generally be lower in the next six months.

He added that it might affect individuals who wanted to sell their cars as the prices could be lower.  — Additional reporting by The Star

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