GOVERNMENT HAS ANNOUNCED THE GOVERNMENT AND SERVICE TAX

(GST) TO REPLACE THE SALES AND SERVICE TAX (SST) EFFECTIVE ON THE
1ST APRIL 2015.
INTRODUCTION
During the presentation of the national budget for the year 2014, the Malaysian
prime minister Datuk Seri Najib Tun Abdul Razak has announced that Good and
Service Tax (GST) will be implemented to replace the Sales and Service Tax (STT)
effect on 1ST April 2014.
GST will replace the sales tax and service available. Currently the sales tax levied on
goods imported or at stages during the manufacturing. Service tax is levied on
certain services, including professional, hotels and restaurants. GST tax system,
claimed to be more comprehensive, efficient, transparent and effective. It also would
presumably increase in annual tax revenue for the government

Now neighboring countries in implementing the GST is Singapore, Thailand,

Indonesia and the Philippines. GST rate used by these countries are Singapore time
5%, 7% Thailand, Indonesia and the Philippines, 10%.

WHAT THE GOOD AND SERVICE TAX ( GST )

Good and service tax ( GST ) is a consumption tax that covers all sectors of the
economy whether the goods and services made in Malaysia or imported except for
goods and services that are categorized under the order of zero-rated and exempt
supplies order. GST is also known as Value Add Tax (VAT) of the value added tax in
the majority of other countries, which means taxes various levels of consumption of
goods and services.
GST was originally introduced in France in 1954 by Maurice Laure who want to
replace a system that depends on uncertain tax on sales to balance the income tax
system is not very effective. Now, there are a total of 160 countries around the world
to implement the GST, such as Japan, China, India and others. While some
countries, especially the United States impose a sales tax on a tax is usually only at
the retail level.
There are have three types of GST to be implemented in different ways on certain
goods and services. The first type of GST is Rate Standard. All goods and services
that fall into this category will be subject to the GST tax rate of 6%. GST will be
levied on the consumption of goods and services at each stage of the supply chain.
This means that there is input tax and output tax in the GST Rate "Standard". In
addition, each of the parties (except for the end user) in the supply chain can recover
their input tax (GST) and will avoid duplication in taxes. However, end users are not

allowed to claim back the GST. Therefore, end users should bear the entire burden
of the tax. Examples of products in this category are clothes, cars, and fruits. Based
on the following diagram, you will better understand how the GST Rate "Standard"
implemented:

The second types of GST is Zero Rate. The Goods and services that fall into this
category will be subject to 0% GST. This means that GST will not be imposed on
end-users. However, business entities CAN recover their input tax. Examples of
products in this category is the basic food (meat, fish and cooking oil) and the first
200 units of electricity per month. The following diagram shows the Zero Rate GST
implemented, assuming the final product is in the category of goods GST Rate Zero
but the raw materials are in the GST Rate "Standard":

The third of types GST is Rate Exemption. The goods and services that fall into this
category will not be taxed and not subject to GST at the output (the rate at which
goods are sold to end users). This means that GST will not be imposed on endusers. Business entities, especially the last in the supply chain (before the end-user)
CAN NOT claim the input tax credit even though they may be subject to GST when
purchasing inputs. Examples of goods and services in this category include
residential and health services. Based on the following diagram, you will better
understand how the GST Rate Exemption implemented:

THE IMPLEMENTATION OF GST

The Government has put in place measures for the effective implementation of
Goods and Services Tax. Time is also given to traders to equip themselves with
information related to the GST. Education, training, awareness and advisory visits on
GST implementation has been undertaken and will continue. Various campaigns in
the mass media is also done particularly encouraging dealers to register early before
the date of implementation of the GST. The Government has also established the
Customs Call Center (CCC) to enable the public to make inquiries about GST and
GST Portal will deliver information on GST to ensure high compliance when GST
implemented.
While prices of essential commodities such as basic food, public transport,
education and health care as a matter of tax-exempt, but the GST is a regressive tax
rate decreases as the national income tax increase. The government announced a
rate of 6% as standard and the average household is expected to pay and 2.52% of
the total monthly as GST (RM90 per month in July 2013) the Government has fully
prepared to implement the GST. GST legislation, infrastructure, computer systems,
personnel and all processes and procedures are in place for the implementation of
the GST.
The implementation of an ill-thought out welfare system is likely to lead to
inflation, abuse, wastage and possibly accentuate a dependency culture. Although
cash hand outs can be a quick fix and might be a politically savvy move, this might
not be conducive in spurring economic growth led by innovation, knowledge and
entrepreneurship.

THE ADVANTAGES OF GST

GST particularly favorable to the government in improving the revenue stream that
can then be used to implement projects for the benefit of the people. Broader tax
base and charged at a rate to enable the government to manage and administer the
system. It is also easily understood by the people against the tax charged at different
rates for different goods and services. It also reduces the burden of the taxpayer to
pay for the amount of income tax is only a few per cent of all Malaysians.
That is the advantage enjoyed by the people in a country that has long been
the implementation of GST in New Zealand, Australia and Singapore. In the
Southeast Asian region, almost all countries have implemented the tax system but
only three countries, namely Malaysia, Brunei and Myanmar.
Among the other advantages of GST is the GST rate is lower (six per cent)
compared to sales and service tax (SST) at the rate of 10 per cent and six per cent.
SST is a double tax, but GST is a tax system on goods and services. Under the SST
users had to pay a higher price because the sales tax is part of the costs to be
included in the sales price and taxable services when providing services to users.
Presently, consumers regardless of income class have to pay sales tax and
service tax on their daily expenses. However, the tax paid mainly sales tax is not
stated in the receipt because it is hidden in the price paid. When the GST tax burden
will go down. This means that with the implementation of the GST many goods and
services would experience a price decline. The important thing is when the dealer
GST should deliver savings through lower prices.

The study found that the Consumer Price Index (HIP), will decline by 8-10
percent. We are confident that with the establishment of a monitoring committee
established by the government GST will ensure smooth and efficient. Government
from time to time to evaluate social impact on the effects of the GST.
Users must also understand that GST is not charged on basic food items,
public transportation, tolls, purchase and rental of residential property, health and
education services, issuance of passports and licenses, electricity consumption for
the first 200 units for domestic consumers and a variety of basic goods and services
other.
GST will increase the flow of national income. The federal government is
expected to generate more revenue with the implementation of the GST. Increased
government revenues can be used for development expenditure and welfare of the
people. More poor people will be helped. GST also enable the government to reduce
corporate and income tax.
This will encourage investment, promoting economic growth in a competitive
global environment. Economic growth will create jobs and increase incomes.
Implementation of GST in 160 countries around the world to prove the GST is a good
tax system, efficient and fair for everyone to pay taxes based on usage.

RESPONSE ON GST
Various reactions received when the announcement was made on the GST.
For ordinary people there who thought the introduction of the GST will be a burden to
them. They thought that after the GST has DONE all prices will be increased. But
after various methods of lighting and exposure do people accept slowly. The
existence of the tax system is more effective, esfisyen, transparent and businessfriendly and able to generate any revenue.
People may not realize that at this time the sales tax at the rate of 5% or 10%
is included in the price they pay for most goods for example electrical goods, clothes,
shoes and home appliances, as sales tax is imposed at the time of manufacture or
import. When the goods reach the consumer, the sales tax paid on the manufacture
will overflow into every stage of the sales price for the supply chain. CBP, unlike
sales tax or service tax is progressive consumption tax that would be imposed on
each stage of the supply chain. At each stage of the supply chain, dealers will be
able to claim back the GST paid on goods and services acquired for business
purposes and thus eliminate the effect caused by overlapping tax under the current
consumption tax.
Therefore, there should be a reduction in the price of goods subject to sales
tax. Users should also be in a better condition for some basic goods such as rice,
vegetables, cooking oil and fish are not subject to GST. However, it is likely that
there will be higher prices on some goods or services that are currently not subject to
sales tax and service tax. Increases should not exceed the rate of GST proposed by
the Government because the dealer can claim back the GST paid on the purchase.

To save costs on traders, traders should review the selling price to produce
elements of the sales tax and service tax from the sale price. Businesses and
consumers have been informed of this through awareness programs. The
Government will take the following steps to ensure that the savings in the business
passed on to consumers:
1. Fully enforce the provisions of the Price Control and Anti-Profiteering Act 2011
empowers the Ministry of Domestic Trade, Cooperatives and Consumerism
Ministry to monitor and control any price increase caused excessive profits.
2.

Drug Guide Price Guide three months before and after implementation of
GST which shows the estimated cost of goods and services as a percentage
increase or decrease expected. The Consumer Price Guide helps people
exercise their rights as a consumer

3.

Working with large supermarkets that they may be price determinants (price
setter) goods.

Conclusion
In conclusion, the GST has been shown to be a better tax system because it is more
effective efficient and transparent. it also can stimulate economic growth and
increase competitiveness in the global market. It is important to replace the existing
SST in order to overcome the inherent weaknesses of such taxes stages overlap,
the transfer price and the value of transactions, there is no complete clearance of
goods exported, encourage vertical integration, administrative bureaucracy, issues
and other classifications. GST is a tax form that can correct a weak tax base, the
catalyst of the industrial sector and the economy, and ease the tax burden of the

people. Impact of waste spending, fiscal crisis and inappropriate actions in financial
management cant be charged with the role of the GST tax.