Due To The SST Exemption, Car Bookings Will Increase, Followed By Cancellations The Following Year

Car showrooms will be busy in the next two and a half weeks, with a surge in bookings expected following the announcement by finance minister Tengku Datuk Seri Zafrul Abdul Aziz on the status of the gross sales tax exemption.

Yesterday, he stated that the SST exemption will not be extended further and will expire as scheduled on June 30, but the government is considering extending the SST exemption to any car booked before July 1 and registered before March 31, 2023.

A surge in bookings before the month is out is thus expected; however, while this will result in an increase in orders for June, it may lead to a possible gross sales glut for the rest of the year, as The Star reports.

According to an analyst interviewed by the publication, there is a chance of a "order avalanche in the next 10 days" as potential car buyers take advantage of the limited time left before the tax break expires. "Key implications include a likely surge in orders for the remainder of June, bringing some sales from the second half of 2022 forward," he said.

This sentiment was shared by a business observer, who cautioned that the repeal of the SST exemption could have the same consequences as the tax holiday that was implemented in 2018. "When the government zero-rated the goods and services tax, or GST, for three months in 2018, demand for vehicles increased." "Car sales were affected for quite some time after the tax holiday ended," he explained.

Meanwhile, Datuk Aishah Ahmad, president of the Malaysian Automotive Association (MAA), stated that the time extension will assist automotive corporations in clearing the backlog of orders. She also hopes that the chip and component shortage will have been resolved by then.

She stated that the association thanked the finance ministry for the concession to apply the SST exemption for automobiles purchased during the exemption period until March of the following year. "We have a backlog of orders, so the move to allow until the end of March 2023 to register new vehicles booked by June 30, 2022 will pacify those customers who have a long wait," she explained, adding that the change will also make order cancellations by clients more difficult.

She echoed the statement made by the business observer about the expected drop in gross sales once the SST exemption expires. She stated that the order financial institution is anticipated to slow after June 30 before picking up once more. "It has always been like that when there is a policy change," she said, adding that MAA expects to meet its total business quantity (TIV) goal of 600,000 models by 2022.

For the record, the SST exemption was first announced on June 5, 2020 as part of the Penjana stimulus package deal to mitigate the consequences of the primary motion management order, which took effect in March of that year. Originally set to expire on December 31, that year, the SST exemption was last-minutely extended to June 30, 2021, and then again to December 31, 2021. During the stalling of Budget 2022, a third extension, the current one, was announced.