Will the GST ruling affect the marketing industry?

The public has been in an uproar in Malaysia with the announcement of Goods and Services Tax (GST) that will be effective on April 1, 2015.

The introduction of GST in Malaysia was announced by Prime Minister Datuk Seri Najib Razak during the presentation of Budget 2014. GST, which is set at 6%, will replace sales tax and service tax.

Any Malaysian business that makes taxable supplies is liable to register for GST if their annual turnover involving taxable supplies exceeds the threshold. Businesses below this threshold however, have the option to register voluntarily.

Advertising + Marketing
spoke to several industry executives to ask the impact on the marketing industry.

Regional director, media of Hakuhodo Communications Asia, Dinesh Sandhu told Advertising + Marketing that the implementation of the GST could put the media industry at a disadvantage.

“With the major proportion of media budgets going to the tax authorities, media agencies will then have a smaller budget to work on. This leaves less space for media agencies to manoevre when planning campaigns,” Sandhu adds.

However at the same time, he admitted that it is too early to predict the future of the industry.

He says, ” It remains to be seen if there will be ploughing back of a portion of the GST revenue from this sector by the Government in the form of incentives, human capital development tax breaks, partial funding of industry bodies like the 4As, 2As, IAA, and MSA among others.”

Managing director, Lowe Worldwide Malaysia, Mazuin Zin however, remains optimistic about the new system. She believes that once consumers have re-calibrated their expenses to the new prices, things will go back to normal.

“We are sure that brands and marketers across categories will be able to sync into this new reality of life within coming months,” she says.

Both Sandhu and Zin believe that the GST will do the country some good as it is currently practiced in over 160 countries, both developing as well as developed and have implemented it well.

“The GST model compensates for the inherent weaknesses in the SST model and should have a positive impact on national economics in the longer run.”

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