Additional 6% tax on Prepaid Reloads and starter packs beginning next week

Prepaid users in Malaysia will have to fork out more next week as 6% service tax will be imposed on all reloads as well as new SIM starter packs. This ruling which comes effective on 15th September 2011 was officially announced today. What this means, you would need to pay RM10.60 for a RM10 reload or RM53 for a RM50 reload card.

According to the report, the regulation is not something new as the Service Tax Act 1975 require all telcos to impose tax on all services including prepaid. It was mentioned that all telcos have been absorbing it for its customers since day 1. All telcos will be sending SMS notification to all subscribers on this latest development tomorrow onward.

The obvious impact is that you would need to come out with extra change to pay for top ups. While it is unlikely that we see a major drop of prepaid subscribers, there’s a likelihood that telcos would spark a small price war over this small increase. The very least, telcos will take the opportunity to give rebates to compensate the additional cost.

When credit cards were imposed with RM50 annual tax fee, we’ve seen how banks find creative ways to maintain customer loyalty. Some of them offer RM50 tax waiver which was cleverly disguised as cash rebates or incentives if they perform a minimum spend or balance transfer.

For our telcos, giving free call minutes and SMS is already a norm and that’s something they might practice extensively in this time of increasing prepaid cost. In the end, prepaid subscribers are just looking for the best value and service from the telcos.

If tax is imposed during point of sale, we wonder if this might spark panic buying of reload cards before the 15th September 2011 dateline. Any thoughts from prepaid users? Drop them in the comments below.