Introduction of GST

Good and Service Tax (GST) is a consumption tax which is known as Value Added
Tax (VAT) and it is levied on the supply of goods and services which from the
supplier stage up to the retail stage of the distribution in the supply chain. Goods and
services tax which paid on the business inputs is claimable, and it is not a part of the
cost of the product. The goods and services tax will go through every single stage in
supply chain, but its inputs tax which incurred at the previous stage will then deducted
by the businesses at the next stage. In Malaysias Budget 2014 speech, the
implementation of GST was introduced by the Prime Minister. The implementation of
GST will replace Malaysias Sales tax (10%) and Service tax (6%). Most of the goods
and services will be charged at a tax rate of 6% at every stage of the supply chain, but
there is some of the basic necessities are not be charged any GST.
There are three different categories of goods and services which under GST scheme
that were introduced in Malaysia that is standard-rated GST, zero-rated GST and
exempted GST. Standard-rated GST is a type of GST which the goods and services
will be charged at a tax rate of 6% at every single stage of supply chain. The
government will bill and collect the tax from the businesses. In this category of GST,
the final consumer will be the one who is going to pay all the tax as every party in the
supply chain will then claim back credits on the GST that they already paid, and it is
known as input tax. Well, the second category of goods and services which under GST
scheme is zero-rated GST. In this category, the goods and services will be charged at a
rate of 0% which means that GST is not be charged to the final consumer. In this
respect, businesses do not collect any GST on their inputs. However, businesses are
able to claim back all the credits on their businesses inputs. The final category of
goods and services which is classified in the GST scheme is exempt-rated GST.
Goods and services in this category is not subject to GST at the output stage as it is a
non-taxable GST. The final consumer will not be charged any GST, however this
goods and serviced tax will be charged to particularly the final party in the supply
chain (before the final consumer). This is because the final party which before the
final consumer in the supply chain unable to claim back credits on their input tax even
if they might have incurred it earlier on.
GST can be charged and levied only of the businesses which is registered under GST.
Besides that, GST is also charged on the import goods and services. However, a
business which its annual turnover of taxable supplies does not reach the prescribed
threshold is not liable to be registered under GST. This mean that, such businesses
cannot collect any GST on its goods and services from their customers. It can judged
to be guilty if business who is not registered under GST charged and collected GST
on the supply of goods and services made to their customers.
Reference:
I.
II.

GST VINTAGE SDN BHD, 2013. What is GST, Scope and Charge. At:
http://www.gst.com.my/what-is-gst-goods-and-servicestax.html.Accessed on 03/05/2015 at 4.53pm.

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http://loanstreet.com.my/learning-centre/GST-In-Malaysia-Explained
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