Right time to implement Ar-Rahnu Act says govt
Published on: Thursday, April 02, 2015
Kuala Lumpur: The government is considering an Ar-Rahnu Act to regulate the Islamic pawn broking industry in Malaysia, which has grown to almost RM5 billion a year, said Malaysia Gold Association (MGA) president Abd Razak Mohd A. Kadir.The Ar-Rahnu business which was set up 25 years ago is currently regulated by the Pawnbrokers Act which was enacted in 1972."Now the government thinks it's about time to do an Ar-Rahnu Act because Ar-Rahnu itself is a big market, worth almost RM5 billion a year. The players from Ar-Rahnu covers the entire spectrum of the industry as well because you have banks, cooperatives and even private limited players coming in," he said.
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Abd Razak said it is time to regulate the Ar-Rahnu business to make it more transparent and to answer current market needs as the business has evolved. "The government was open enough to ask for our input. We've given our input and it has been taken positively. We'll keep on engaging them. They've indicated to us that they would like to implement the Ar-Rahnu Act as an act of parliament by next year," he said.In its engagement with the government, MGA has also asked the government to relook the model of the pawn shop business and to consider changing it into a one-stop gold centre, which would enable pawn shops to buy and sell gold bars, gold dinars and possibly sell gold jewellery in the future.
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"We are already in the gold business, we accept gold as pawn. So why can't we sell for instance, gold bar or gold dinar as well? It works for the people right? Or why can't we buy used gold or pre-owned gold?" he questioned, adding that a one-stop gold centre would provide convenience to the public.On the implementation of the Goods and Services Tax (GST), MGA is working towards getting GST-exempt status for locally minted gold bars, which will be taxed 6pc from April 1.
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According to Abd Razak, investment precious metals (IPMs) comprising gold, silver and platinum are currently GST-exempt but for investment gold, only those accredited or certified by the London Bullion Market Association (LBMA) are GST-exempt."In Malaysia, the market trading value for the IPMs is about RM10 billion annually, of which 90pc are LBMA-accredited bullion and only about 10pc are locally minted," he said, adding that the standards of locally minted gold bars are the same with LBMA-accredited gold bars, either 999 or 995.MGA secretary Datuk Wira Louis Ng Chun Hau said smaller local players will lose out thus the urgency for MGA to set up a technical committee to present its case to the Royal Malaysian Customs Department and Finance Ministry.Abd Razak said MGA will work on a proposal within the next three months and look at the possibility of working with Sirim to come up with standards for locally minted gold bars which can be recognised and exempted from GST.MGA also wants to propose a GST model for gold jewellery to the government, similar to Turkey whereby GST is only imposed on value added such as labour cost and design, but not on the value of the gold. Ng said Turkey is the world's third largest importer of exporter of gold, with a vibrant gold trading market. Stay up-to-date by following Daily Express’s Telegram channel.
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