Published: December 6th, 2009
On 24 November 2009, Malaysia Prime Minister, Datoâ Sri Mohd Najib Tun Abdul Razak had announced that a bill relating to the proposed introduction of GST â Goods and Services Tax will be tabled at the end of the current Parliament Sitting. For your info, Goods and Services Tax will be implemented starting 3rd quarter of year 2011. Therefore, all Malaysian have to prepare yourself to pay 4% extra for everything you buy or service.
What is GST?
GST, a multi-stage consumption tax, is based on consumption rather than earnings and can be charged on virtually all supplies of goods and services. The proposed implementation of GST will replace the current Malaysian service tax and sales tax.
Broadly, GST works by offsetting GST paid on purchases (input tax) against GST due on sales or supplies made (output tax). This is referred to as the credit offset mechanism. The multi tier stages of tax helps to ensure that GST paid by businesses for purchases does not end up being a permanent cost. However, the consumer ultimately bears the burden of the tax.
How GST affects businesses?
Where GST is implemented, the taxpayer must be registered with the Royal Malaysian Customs once the taxpayer achieves a certain prescribed annual sales turnover. The registered taxpayer would also be required to submit periodic GST returns.ďż˝ If the output tax is greater than the input tax, the taxpayer will have to pay the excess.ďż˝ Conversely, if the input tax is greater than the output tax, the taxpayer could seek a refund from the Royal Malaysian Customs.
In addition to the compliance requirements above, taxpayers would be required to undertake additional administrative work which includes, amongst others, keeping track and recording all input taxes paid, undertaking reconciliations and filing of GST returns.
How does GST work?
Conceptually, GST is imposed on the value added to goods or services by each separate processor in the production and distribution chain. This can be seen in the simple illustration below.
What do YOU need to do?
At this point in time, the issues in relation to GST that businesses should consider include:
ďż˝ďż˝The additional record keeping requirements that GST will impose and your IT systems ability to handle this.
ďż˝ďż˝The likely GST treatment for your products / services and the impact on pricing strategies.
ďż˝ďż˝The impact of GST on long term contracts.
ďż˝ďż˝The GST cost of outsourcing versus internal supply.
ďż˝ďż˝Timing of purchases pre and post the implementation of GST.
ďż˝ďż˝Impact of GST on benefits-in-kind to staff and provision of samples and gifts.
ďż˝ďż˝The need to educate your staff and customers on GST issues and compliance.
What do you think about GST â Goods and Services Tax? Should it be implemented in our country? Are Malaysian ready to pay for the extra tax? What say you?
To a certain extent, it will somehow affect pockets of middle and lower income group Malaysians.The arguments:
1.Recent price hike in petrol, prices of commodities have increased drastically. And now another one called GST?
2.Income tax brackets for high earners arenât as âexpensiveâ as middle-to-low income groups. Check Malaysiaâs Income Tax Rates 2009 Âť
3.The Malaysian government has saved approximately RM2 billion (RM2,000,000,000) by lowering fuel subsidies â Whatâs the take on GST now for lower income groups?
4.GST is tax on SPENDING. Basically, everything from parking fees to purchasing mattress. Even with GST-exempted items, this would still hit lower income groups in Malaysia.
5.Private sectors arenât paying much to Malaysians â Other more developed countries such as Singapore could take this hit because wages & salaries are much higher.
6.Other countries such as Britain, India, Hong Kong, Japan and Singapore has GST â Doesnât mean GST has to be implemented in Malaysia. Their economic status and way of gaining revenue varies from Malaysia. (GST is also called VAT â Value Added Tax in other countries)
7.Inflation may happen. Prime Minister Mr. Najib has guaranteed no inflation â But with the introduction of GST, the chain of âpassing the costâ will end up usually at the hands of consumers.
8.Corruption isnât a rare thing in Malaysia â So businesses has already included âcorruption pricesâ in goods & services. How does that not reflect additional costs to consumers?
9.Out of inflation pressures, higher prices for goods & services are sought.
Prime Minister Mr. Najib has promised Malaysians that they will be tabling a public discussion on GST (called the GST Bill) on December. There are also several upsides that could be seen â But until Mr. Najib tables the meeting on GST Bill, we shouldnât be skeptical of anything yet.
Other side of the GST story
GST has been said to promise a few things:
1.Implementation will not be abrupt. It will be a slow & steady tax preparation so that individuals and small businesses will not be adversely affected.
2.It will replace the 10+5% services and goods tax. This means taxes are lower now â Consumers need not pay more for one area, but itâs divided into many other source of âtaxâ payments.
3.GST rates are promised at 4%, out of the normal 10% or 5% charged in restaurants.
4.Implementation will not occur until middle to late 2011 or 2012. Planning time is essential to not put âinflation pressureâ on small businesses.
5.Governmentâs coffers will increase. This will enable further development and budget control to the country, other than relying just on petroleum or income tax revenues.
6.Tax when consumed, not when earned is much better. It allows better control. Spending influences will be âCarefulâ and âMore controlledâ when purchasing on higher prices are made rather than âtaxable incomesâ generated from work.
Itâs a broad-based tax system. Some items may be slightly more expensive & cheaper. Itâs not a overall standardized taxation method.
my question: i am charged 6% tax in my astro bill, does this mean when GST is implemented, i will be only charged 4% in my astro bill?
This post has been edited by hazremi: Mar 4 2011, 07:19 PM