DAP: Health minister either lying or ignorant over GST

DAP publicity chief Tony Pua (pic) commented on reports quoting Subramaniam saying healthcare costs would not be impacted when the GST is implemented in 2015.

On Tuesday, Subramaniam had said healthcare was generally GST-exempt and that the ministry would be carrying out an in-depth study on the GST structure before issuing a detailed list of services and health products which are exempted from the GST for public consumption.

Subramaniam had also urged all quarters to "not make speculation on this to avoid confusing the people."

Rebutting the minister, Pua said: "It is Subramaniam who should stop making misleading remarks 'to avoid confusing the people' and not otherwise. The Health Minister and many other Barisan Nasional leaders are obviously either ignorant about what is meant by GST-exempt, or choose not to be truthful about it."

Pua said, the government's GST website (http://gst.customs.gov.my) has explained "GST-exempt supplies" very clearly. In his explanation, a GST-exempt product or service only meant that no GST will be imposed by the provider to the consumer.

"However, provider of these products and services such as hospitals will still be required to pay GST for all products and services it purchases from its suppliers."

He cited an example of a hospital purchasing a drug from a medical supplier for RM50, and then sell it to patients at RM55 for a 10 percent profit margin.

"After the implementation of the GST, the hospital will have to pay the medical supplier RM50 plus six percent GST, amounting to RM3. The cost to the hospital would increase to RM53.

"If the hospital was to maintain the price of the drug to the consumer, then the hospital will only be making a profit of RM2 or a 3.8 percent profit margin," Pua said.

He said Subramaniam "must be day-dreaming to believe that Malaysian hospitals will be so magnanimous to absorb all the GST-induced increase in cost and continue to provide its products and services to the public at existing prices, and suffering a severe squeeze in profitability."

Continuing with the example, the Petaling Jaya Utara MP said assuming that the hospitals were 'extremely kind' and decided to only pass on the increase in cost in absolute terms to the patient, then the price of the drug sold would increase from the previous RM55 to RM58.

Pua said the RM3 increase is the amount of GST paid by the hospital to the Government, hence the hospital is only reclaiming its actual increase in cost.

"At RM58, that will already result in a 5.5 percent increase in healthcare cost to the consumer."

Pua said, this was just a conservative estimate and in the end the final prices might be even higher with markup by the hospital or medical businesses.

Given the example, Pua said "it is a practical impossibility" for the Government to control post-GST prices of goods and services in hospitals.

"Based on the explanations given by the Finance Ministry on 'GST Exempt Supplies', it is clear that our BN ministers either have an incompetent understanding on the impact of GST or they chose to be untruthful about its negative price impact."