The introduction of the new tax system is expected to have an impact on style.
YOU can always count on certain fashion items to remain as staples over the years. One very good example is the classic “little black dress” that every woman surely has in her wardrobe.
That said, not everything stays the same. The cost of looking stylish, for instance, goes up as time passes. While a change in prices is nothing extraordinary as a gradual inflation is to be expected, a sudden increase can be daunting. Many feel that the 6% Goods and Services Tax (GST) will greatly impact our fashion expenditure. But will its implementation, starting from April 1, really make fashion items that much more expensive?
The current sales tax is fixed at 10% for fashion items – with the exception of watches – which are exempted. There is also an additional import duty which varies for different product categories.
Parkson’s chief operating officer Law Boon Eng points out that even though the GST replaces the existing sales tax, it does not affect import duties. Fashion imports will still be subjected to that levy.
Law foresees a slowdown in buying after the GST comes into effect. According to him, there will be a subdued period within the fashion industry before it gradually normalises.
“All product categories will be affected as consumer sentiment deteriorates. This is due to the impression – whether true or not – that everything is going to cost more,” Law explains.
Senior sales and marketing manager for Braun Büffel Malaysia, Jacqueline Choo, agrees. She says that once the GST takes effect, consumers will be more careful with their spending.
“We also expect a rush in purchases before April 1. It all depends on the consumers’ perception of GST. And whether they understand how the new tax system will be implemented,” Choo states.
At present, many businesses pay multiple taxes, which leads to a cascading effect along the supply chain. With the GST, businesses can benefit from recovering input tax.
This simply means businesses will be able to claim for the GST paid for raw materials or transportation. Only the GST levy on the final price of the product (output tax) is passed on to consumers.
The GST is a consumer tax, which serves to remind consumers that they are only paying for what they spend. Businesses are not supposed to gain from it by increasing prices indiscriminately.
Nevertheless, there are concerns that profit margins will be affected. A case in point is where a supplier company is not GST-registered, and businesses dealing with them are then unable to recover their input taxes.
Marketing manager for Sacoor Brothers Malaysia, Hugo Carriço, however, believes that the GST is an evolution of the market and companies must take it in stride. He is confident of consumers being able to discern which brands give them added value.
“There may be a wait and see attitude as already predicted by analysts. Both the luxury and fast-fashion segments will similarly be affected by this. By what proportion? We still don’t know,” Carriço adds.
There is also talk about different brands absorbing the cost of the GST and not passing it down to consumers. It should be noted that this means that the tax is still being paid.
It just means that some companies are willing to lower their profit margins by reducing the prices of their products. As a result, the final amount paid by consumers (inclusive of the GST) is lower, and equivalent to current prices.
As such, no one can really say how prices will change. Except for watches, which will definitely cost more as they are no longer tax exempt under the GST, other fashion items may or may not be more expensive.
Will the impending GST force fashion-forward Malaysians to completely cut back on shopping? While it may not be entirely true, there is still a widespread belief that everyone will be more selective with their purchases.
NEXT PAGE: Consumers Have Their Say
Sharon Kuan, 28
“I currently spend between 10%–15% of my monthly pay on fashion. The GST will affect my purchasing habits slightly, but I guess I just have to shop smarter. Maybe just buy during sales or when there is a special members’ day promotion.”
Venoshia Vellasamy, 27
“I think fashion is a form of how you’d want to present yourself to others. Is it a necessity? It really depends on the profession you are in. I will definitely feel the pinch once the GST is implemented. Maybe a few cuts to my shopping are in order.”
Shaiful Mukhelas, 30
“I will definitely scale back on designer labels, but not high-street ones. Then again, I have no qualms about shopping less on the whole. Fashion seasons? We are living in a country where there are only two real seasons: rain and shine.”