GOOD AND SERVICES TAX

INTRODUCTION

WHAT IS GST?
consumption

tax based on the valueadded concept. on goods and services at every production and distribution stage in the supply chain. proposed GST will replace the current sales tax and service tax

imposed

The

IMPLEMENTION

Why does the government want to implement GST ?

To enhance the capability, effectiveness and transparency of tax administration and management.

When will the government implement GST?

The Government has not determined the implementation date of GST in Malaysia. Presently, the Government is actively involved in providing awareness and knowledge on the concept and rules regarding GST implementation.

RATES

RATE OF GST THAT WILL BE IMPOSED:

The social and pricing impact studies conducted by the Ministry of Finance indicated that the suitable GST rate is in the range of 4%.

GST RATES IN ASIA PACIFIC

http://malaysiafinance.blogspot.com/2010/03/ma laysias-gst-must.html

Why a GST rate which is lower than the current tax rate?
To

neutralize GST impact on the consumers so as not to unduly burden the consumers especially the lower income group. is expected that the consumers will benefit from the price reduction in most of the goods and services.

It

COMPARISON

The comparisons between GST and Sales Tax & Service Tax
GST Tax on all value added activity. Involve everybody. A flat rate of 4%. Base on some other country practice, it is a direct tax, where we pay directly to the government. Payer has to workout the computation. Sales tax and Service tax Tax on consumption of selected goods and services. Usually only the final user taxed. Sales tax vary depends on goods. Service tax flat rate 6%. Indirect taxes. We pay to the supplier or service provider, then they remit the money to Custom. Payer no need to compute anything.

REASON SST REPLACE BY GST

GST is a more comprehensive, effective, transparent, and business friendly tax system. GST can overcome the various weaknesses inherent in the present consumption tax system. GST is expected to increase tax compliance and is easier to administer in view of its self policing method. The businesses are required only to submit simplified tax returns based on prescribed formats. All records and documents relating to the relevant transaction are required to be kept in the business premises for audit by the GST auditor.

CONCEPT

THE GST CONCEPT

GST

is charged and collected on all taxable goods and services produced in the country including imports. businesses registered under GST can charge and collect GST

Only

THE GST CONCEPT

Supplier of raw materials/ services

Supplier of finished taxable good/services GST (output tax)

Consumer / End User

GST (input tax)

i.
ii. iii.

GST collected on output (output tax) is deducted against the GST paid on input (input tax).
If there is excess, the amount shall be remitted to the government within the stipulated period. If there is deficit, businesses can claim for refund from the government.

SUBJECT OF GST

GOODS AND SERVICES SUBJECT TO GST

In principle, GST is imposed on all goods and services produced in the country including imports. 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.

BUSINESSES SUBJECT TO GST

Only

businesses with annual sales turnover of RM500,000 and above are liable to be registered under GST. Businesses having an annual sales turnover of less than this amount are not liable to be registered under the GST. However, such businesses can apply for voluntary registration.

WHY IS THE THRESHOLD FIXED AT RM500,000

The annual threshold is fixed at RM500,000 to ensure that the small businesses are GST-free and are not required to bear the costs of registration (start-up cost and compliance cost) under the GST. Based on studies, it is estimated that about 78% of the total business establishments will not fall within the GST system. As such the consumers has the choice of making their purchases of basic needs from the businesses which do not charge the GST. Indirectly, the consumers

THE CALCULATION OF THE THRESHOLD :

Method

1 Calculation based on the sales records for the preceding 12 months.

Method

2 Calculation based on the estimated sales for the next 12 months.

ADMINISTER

ADMINISTERS OF THE GST

The government has decided that the Royal Malaysian Customs Department (RMC) manages and administers the GST to be implemented in Malaysia.

The e-poll is put up by Royal Malaysian Customs at its official website :

http://www.nbc.com.my/blog/do-you-agreethat-gst-should-be-implemented-in-malaysia/

Reasons support for GST:

Increase national/government revenue and mitigate the heavy reliance on income tax and petroleum tax, in which income taxes contributed 44.4% of government revenue in 2010. Tax burden will not increase when income level increased. Everyone will pay tax and tax burden is spread over, instead of just relying on income taxes derived from 15% of the working population. Overcome the loopholes of current sales and services tax systems. Eliminate over-lapping tax at different stages, as GST is generally charged on the consumption of goods and services at every stage of the supply chain, with the tax burden ultimately borne by the end consumer. More stable for government revenue with GST as a consumption tax based, compared to direct income taxes and minimise the impact of economic cycles, particularly during recessions. Corporate tax and individual tax rates could be reduced. Minimise the occurrences of tax evasions.

Reasons disagree with GST:

May result in inflation as general products prices may go up. Increase the tax burden on low income working group (the other 85% as described item 3 above) The government may possibly increase the GST rate from 4% to 15% to increase revenue. Worry that the GST tax may even higher than current sales tax 10% and service tax 5%. Worry that the effect of tax revenue re-distribution may not be achieved

BENEFITS

BENEFITS FOR BUSINESS

The GST is not a cost to business as the GST paid on the business inputs can be claimed as tax credit. The cost of doing business will decrease by an amount of RM4.3 billion inclusive of a saving of RM1.4 billion by exporters on their business inputs. Local products and services more competitive in the domestic and international markets. Improve tax compliance and is easier to administer due to its self-policing feature. Bureaucracy in the governments delivery system will be significantly reduced.

BENEFITS FOR CONSUMERS

Based on a GST rate of 4%, it is expected that there will be a price reduction between 0.08% to 2.71% in respect of eight components of goods and services. The cheaper goods and services such as clothing and footwear, basic food, communication, furnishings, hardware and maintenance, transport, housing, water, electricity, gas and fuel. The tax burden is expected to be lower compared with that under the present tax system.

BENEFITS TO GOVERNMENT
mechanisms

that can trim persistent financial deficits and rising debt burden. to prepare for rainy days ahead and stabilise revenue base for

savings

strengthen

the future

CONCLUSION

Is the government implement GST?

The

government is ready to implement GST at any time. Government machinery such as the Ministry of Finance, the Customs Department, the Ministry of Domestic Trade, Co-operatives and Consumerism has taken steps to prepare the requirements for the GST implementation