penasakinah

ISSUE GST

Goods and Services Tax or GST is a consumption tax based on value-added concept. Unlike the present sales tax or service tax which is a single stage tax, GST is a multi-stage tax. Payment of tax is made in stages by intermediaries in the production and distribution process. The tax itself is not a cost to the intermediaries since they are able to claim back GST incurred on their business inputs. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.

GST is a tax charged on the supply (including sales) of goods and services made in Malaysia and on the importation of goods and services into Malaysia. Even though GST is charged on the sales price of the goods or services, the amount to be remitted to the Government is only on the value added to the goods or services at each level of the distribution/supply chain.

 The value added is the value that a producer (whether a manufacturer or distributor, etc) adds to its raw material or purchases before selling the new or improved product or service. To enable this, GST adopts a credit offset mechanism whereby GST charged on the output of the business (for example, sale of product manufactured or services supplied) is offset against the GST paid on the goods or services acquired as inputs (for example, raw materials or utilities to be used in manufacturing) by the business.

 GST charged on output is called output tax. Whereas, GST incurred on acquisition is called input tax. This offsetting mechanism is to ensure GST paid by businesses is recoverable and thus help to reduce the costs of doing business.

The Government had conducted social impact studies which show that consumers will most likely bear some slight additional tax burden depending on their consumption pattern and the rate of GST to be fixed. To ease the increase in tax burden, tax and non-tax package may be given. However, basic items such as rice, poultry, meat, vegetable, flour, cooking oil, sugar, residential and agricultural properties, education and health services will not be subjected to GST.

The first hurdle is that tax is not a popular subject matter and generally nobody likes to be taxed or rather the word "tax" is taboo to many. However, governments all over the world need to impose tax in order to get the revenue to provide their citizens with their social needs (infrastructure, health and education services), industrial growth which results in employment opportunities, security, etc. People find it difficult to accept the GST due to lack of knowledge on GST and how it benefits them.

The second hurdle is the level of knowledge on GST. It is not easy to educate consumers on GST as the moment you mentioned that GST is a form of tax you will first be faced with a wall of resistance. Thus, GST and its benefits have to be explained to them continuously in order to avoid or eliminate whatever misconception or the wrong representation provided to them regarding GST.  

Towards this end, the Government has emphasized that the racial have to understand GST before it is actually implemented. Currently, people are also not aware that the GST will replace the current sales tax and service tax. In fact, many people are not even aware that they are paying sales tax and service tax on a lot of goods and services because of its single stage nature.