This has been a year of a lot of bad news, some even tragic. But in between the bad news, there have been times when good news has come through like rays of sun piercing through dark clouds. For the auto industry, things looked grim in the first half of the year when shutdowns collapsed the market for a month. Then when the government started to plan for recovery, help came in the form of exemption of sales tax until the end the year.
This incentive must have made a difference as sales have been high over the past 5 months while people wanted to use the opportunity to save money on their purchase. As always, being able to sell cars at lower prices helps, and the companies hoped that they would get the exemption period extended into 2021. The Finance Ministry at first said no, and despite it being a time when many go on leave, some had to prepare new pricelists with the sales tax included again.
Finance Ministry changes its mind
Then, for reasons unknown, the Finance Ministry changed its mind and like the ray of sunshine in June, there was another ray again as it was announced that the exemption would continue until June 30, 2021. Whether it continues to be part of the Penjana stimulus package or is a separate provision is not known.
So for those who were disappointed that they missed the chance to save money because they could not get their loan applications approved in time or stocks were not available, this would be good news. There is no change to the exemption which also includes reconditioned vehicles.
Full exemption for locally-assembled models
Vehicles that are assembled locally will be entitled to the full exemption which is 10%, and those which are imported in CBU (Completed Built-Up) form will have only half the exemption, ie 5%. However, the exemption is not applicable to commercial vehicles and pick-ups.
Generally, this means that the sales tax-exempt prices that have been applied since June will continue unless the company has reason to adjust prices. There may also be some new models that were due for delivery starting in January (eg the new Honda City RS e:HEV and the BMW 530i M Sport Dark Shadow Edition) which will be cheaper without sales tax being included.
It is also learnt that the dreaded revision of Open Market Value (OMV) calculations that was to have been adopted from the start of 2021 would no longer take place. This would have raised prices of new vehicles but now, it seems that Customs has decided not to pursue the matter.
