Goods and Services Tax (GST) will be implemented with effective from 1 April 2015. GST rate is fixed at 6%. How will this affect your silver investment?
First of all, will GST be applied on silver? The answer is a clear YES, regardless whether you buy silver bar, silver coin or silver round.
Mr. Nur Hilmy Ahmad from Nubex Sdn Bhd (one of the largest gold and silver dealers in Malaysia) wrote to Jabatan Perlaksanaan GST and got a firm replied that GST will not be exempted from GST.
Is there any exception on products and services that do not need to pay GST? Yes there are…
According to NBC Group, GST is imposed on all goods and services produced in the country including imports. However, certain basic foodstuff likes rice, sugar, flour, cooking oil, vegetable, fish and meat, eggs and essential services such as health and private education, public transportation, residential property and agricultural land are not subject to GST.
GST will also not be imposed on piped water and first 200 units of electricity per month for domestic consumers and Transportation services such as bus, train, LRT, taxi, ferry, boat, highway tolls as well as education and health services are exempted from GST.
However, silver is NOT categorized into any of the above.
When your dealer(s) charge extra 6% on your silver purchase from 1 April 2015, they did not pocket the 6%. They are merely collecting in on behalf of the government.
So, do you buy more silver now (without GST) to avoid paying GST on silver after 1 April 2015?
That will depend where you think silver price is heading.
- If silver price rises much higher over the next few years, it is definitely a good idea to stock up more silver now to enjoy additional 6% profit;
- If silver price remains unchanged between $19/oz and $20/oz over the next few years, it is still a good idea to buy a few more ounces for 6% saving;
- If silver price drops more than 6% from current spot price, it will be wise to hold your purchase. A sample illustration as following: Current silver spot price is $20. If silver price drops 10% (more than 6%) next year, the effective cost for buying 1 oz of silver will be $19.08 even included GST ($20 – 10% + 6%). In other words even GST has been imposed, if silver price dropped more than 6%, you will still be paying a lower price compare to buying now without GST.
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