A very good morning ladies and gentlemen. Welcome to the National GST Forum.

Today, Ive
been asked to give a speech entitled What is GST: Understanding the GST Concept and
Fundamental. The purpose for giving this speech is to ensure that everyone who is here and
those who will be involved with GST or Goods and Service Tax have a better and clearer picture
regarding this issue and why is there a need for the government to implement it.

YOUR GST TIMELINE FINGERTIPS

17 months before GST implementation
As announced on 25th October 2013 by our prime minister, Dato Seri Najib Tun Razak, GST
implementation is set to be effective on 1st April 2015 at 6%.
6 months before GST implementation
GST Registration starts on October 2014
It is the recommended period of time to register GST since it provides adequate time for
businesses to make preparation
3 months before GST implementation
January 2014
GST system makes compulsory for businesses which exceeded the prescribed threshold
to register GST
Official date of GST implementation
1st April 2015
GST registered businesses begin to charge 6% GST
The sales tax in its existing form is limited in scope and has a number of inherent
weaknesses which has resulted in the Government losing revenue.
Such weaknesses can be overcome by introducing the Goods and Services Tax (GST)/
Value Added Tax (VAT), which is broad based consumption type that is adopted by160
countries. More taxpayers will be included in the tax collection system regardless of their
age as long as there is consumption.
The rate and scope of the tax can be structured in such a way that it does not have a major
impact on prices of consumer goods.
Specific provisions can also be made to ensure that the lower income groups and small
scale enterprises are not adversely affected by the tax.
 There are implications related to a VAT which is broad based consumption type that is
adopted by160 countries. More taxpayers will be included in the tax collection system
regardless of their age as long as there is consumption.
The rate and scope of the tax can be structured in such a way that it does not have a major
impact on prices of consumer goods.

Ladies and gentlemen,

Malaysia has implemented the Goods and Service Tax (GST) on the 1st April 2015.With its
implementation, the sales and service tax that had been used in Malaysia over the last few
decades is no longer applicable. GST ( Good & Services Tax ), Which is also known as VAT or
the value added tax in many countries is a multi-stage consumption tax on goods and services.
GST is levied on the supply of goods and services at each stages of the supply chain from the
supplier up to the retail stage of the distribution. Even though GST is imposed at each level of
the supply chain, the tax element does not become part of the cost of the product because GST
paid on the business inputs is claimable.
Hence, it does not matter how many stages where a particular good and service goes through the
supply chain because the input tax incurred at the previous stage is always deducted by the
businesses at the next in the supply chain.

GST is a broad based consumption tax covering all sectors of the economy i.e all goods and
services made in Malaysia including imports except specific goods and services which are
categorized under zero rated supply and exempt supply orders as determined by the Minister of
Finance and published in the Gazette.

The basic fundamental of GST is it's self-policing features which allow the businesses to claim
their input tax credit by way of automatic deduction in their accounting system. This eases the
administrative procedures on the part of businesses and the Government. Thus, the Government's
delivery system will be further enhanced.

Ladies and gentlemen,

Why GST? Why is there a need for the government to implement it? What is wrong with
the Sales and Service Tax which was implemented before this? The government needs to
implement GST because GST is a better and fairer tax system compared to SST (Sales & Service
Tax) as GST will :
1. Lower business cost
Under the current system, some business pay multiple taxes and higher levels of tax-on-tax
(cascading tax). With GST, businesses can benefit from recovering input tax on raw materials
and incurred expenses, thus reducing costs.
2. Increase global competitiveness
Prices of Malaysia exports will become more competitive on the global stage as no GST is
imposed on exported goods and services, while GST incurred on inputs can be recovered
along the supplies chain. This will strengthen our export industry, helping the country
progress even further.
3. Enhance compliance
The current SST has many inherent weaknesses making administration difficult. GST system
has in-built mechanism to make the tax administration self-policy and therefore will enhance
compliance.
4. Reduces red tape
Under the present SST, businesses must apply for approval to get tax-free materials and also
for special exemption for capital goods. Under GST, this system is abolished as businesses
can offset automatically the GST on inputs in their returns.
5. Equity
With GST, taxes are leveled fairly among all the businesses involved, whether they are in the
manufacturing, wholesaling, retailing or service sectors.
6. Fair pricing to consumers
GST eliminates double taxation under SST. Consumers will pay fairer prices for most goods
and services compared to SST.
7. Greater transparency
Unlike the present sales tax, consumers would benefit under GST as they will know exactly
whether the goods they consume are subject to tax and the amount they pay for.

. Before GST, Sales and Service Tax only covered, Service Tax is a form of indirect tax imposed
on specified services called "taxable services". Service tax cannot be levied on any service which
is not included in the list of taxable service.
A service tax applies to certain prescribed goods and services in Malaysiaincluding food, drinks
and tobacco; provision of rooms for lodging and premises for meetings, conventions, and
cultural and fashion shows; health services, and provision of accommodation and food by private
hospitals.

The tax also applies to professional and consultancy services provided by accountants, advocates
and solicitors, engineers, architect, surveyors (including valuers, assessors and real estate
agents), advertising agencies, consultancy firms, management service provider, insurance
companies, motor vehicle service and repair centres, telecommunication services companies,
security and guard services agencies, recreational clubs, estate agents, parking space services
operators and courier service firms.

However, professional services provided by a company to companies within the same group will
be exempted from the current service tax of 6%. Courier services provided from a point
within Malaysia to a destination outsideMalaysia will also be exempted from the service tax of
6%.

Generally, the imposition of service tax is subject to a specific threshold based on an annual
turnover ranging from RM150,000 to RM500,000.

Sales Tax
Sales tax is a single stage tax imposed at the import or manufacturing levels. InMalaysia,
manufacturers of taxable goods are required to be licensed under the Sales Tax Act 1972.
Companies with a sales turnover of less than RM100,000 and companies with Licensed
Manufacturing Warehouse(LMW) status are exempted from this licensing requirement.
However, companies with a sales turnover of less than RM100,000 have to apply for a certificate
of exemption from licensing.

Licensed manufacturers are taxed on their output while manufacturers that are not licensed or
exempted from licensing need to pay tax on their inputs. To relieve small-scale manufacturers
from paying sales tax upfront on their inputs, they can opt to be licensed under the Sales Tax Act
1972 in order to purchase tax-free inputs. With this, small-scale manufacturers can opt to pay
sales tax only on their finished products.

Sales tax is generally at 10%. However, raw materials and machinery for use in the manufacture
of taxable goods are eligible for exemption from the tax, while inputs for selected non-taxable
products are also exempted.

Certain non-essential foodstuffs and building materials are taxed at 5%, general goods at 10%,
liquor at 20% and cigarettes at 25%. Certain primary commodities, basic foodstuffs, basic
building materials, certain agricultural implements and heavy machinery for use in the
construction industry are exempted. Certain tourism and sports goods, books, newspapers and
reading materials are also exempted.

Ladies and gentlemen,

I personally believe that Malaysians will benefit from the implementation of GST. For example
they will We do not pay GST on goods / services which are:
Zero-rated supplies
Exempt supplies
Zero Rated Supplies
These are taxable supplies that are subject to a zero rate. Businesses are eligible to claim input
tax credit in producing these supplies, but cannot charge output tax to the consumer.

Exempt Supplies
These are non-taxable supplies that are not subject to GST. Businesses are not eligible to claim
input tax credit in producing these supplies, and cannot charge output tax to the consumer.
How GST is charged at each level of supply chain - standard rated supply

Retailer (You) is not GST registered

GST 6%

RM100,000 Sales price RM150,000 Sales price RM175,000

Sales price

Assume manufacturer's GST for Add GST 6%RM6,000 Add GST RM9,000 Add GST 6%Not
6% applicable
 Total RM106,000 Total RM159,000 Total RM175,000
purchases is RM2,000

Input tax Input tax Input tax

RM2,000 RM6,000 can't claim
credit credit credit

Cost
GST remit RM4,000 GST remit RM3,000 RM9,000
increased

Cost
(6,000-2000) (9,000-6000) N/A
increased

Ladies and Gentlemen,

Malaysias economy is developing fast. As part of our Economic Transformation Programme,

we have introduced economic reforms designed to transform Malaysia into a high-income
economy by 2020.

Malaysias economic fundamentals are strong. Last year, our GDP grew by 4.7 percent. And in
the first half of this year, our growth rate was 6.3 percent, which exceeded expectations. In fact
we have even had to revise our 2014 growth projections upwards.

In 2013 Malaysia attracted more foreign direct investment than ever before, an increase of 24
percent from the previous year. This investment is creating more well paid jobs for Malaysians
and boosting export growth.
Our Gross National Income per capita continues to rise. From 2009 to 2013, GNI grew by 42.5
percent, reaching 10,060 dollars. And the poverty rate dropped from 3.8 percent in 2009 to 1.7
percent in 2012. The standard of living for Malaysians is steadily increasing.

This progress is indeed very welcome. But lasting success requires a sustainable economy,
which means keeping our debt and spending levels under control. That is why we are cutting our
fiscal deficit. In 2009 our fiscal deficit was 6.6 percent of GDP. It has fallen every year since and
in 2013 our fiscal deficit was 3.9 percent. We are committed to reducing the fiscal deficit to 3.5
percent this year and 3 percent next year, on our way to a balanced budget.

Ladies and Gentlemen,

Not only are our Economic Transformation Programme initiatives and reforms working, but their
results are being internationally recognized. Malaysias economy ranks 6th out of 189 countries
in the World Banks ease of doing business survey. In the World Economic Forums latest Global
Competitiveness Report, Malaysia rose to 20th out of 144 countries. And Bloomberg places
Malaysia 3rd in its list of the 22 best emerging markets.

Our success did not come out of thin air. It came because we made the right decisions for
Malaysia. I have always maintained that in politics you have to make the right decisions, not just
the easy and populist ones. If we want to achieve developed nation status by 2020, we must not
take our growth and development for granted. In an increasingly interconnected world, it is
important that we build a stronger and more resilient economy. To do so we must continue to
pursue fiscal consolidation and fiscal sustainability. We must reduce our deficit, spend prudently
and invest wisely in our future, and we must make our businesses more competitive.

One of the things we need to do is broaden our tax base. Only 1 in 10 Malaysians pay personal
income tax. And given that approximately 40 percent of the governments revenue comes from
oil and gas, a resource which we know is finite, it is clear that Malaysia cannot sustain its growth
and development based on current revenue streams alone. It is imperative that we expand and
diversify our tax base and implement a more effective and equitable tax system that will allow us
to secure our future.
The Sales and Service Tax is no longer fit for a rapidly growing and economically progressive
economy such as Malaysia.

That is why in April we will reform the tax system and replace the Sales and Service Tax with a
Goods and Services Tax. An important initiative under the Economic Transformation
Programme, the GST is a strategic reform aimed at modernizing our taxation system to make it
more effective, more efficient, and more business friendly.

The GST is a modern tax which will eliminate the inherent weakness in the current tax. For
example, the GST has cross checking elements that will increase tax compliance and promote
saving and investment.

The GST will also make our businesses more competitive in the global marketplace. No GST
will be applied on exported goods and services, and Malaysian businesses will benefit from a
lower cost of doing business by recovering input tax. Taxes will be applied fairly among all
businesses, making it a more just tax. Put simply, the GST will be good for business.

Ladies and Gentlemen,

We certainly dont want the GST to have an adverse impact on the rakyat. That is why many
goods and services will be tax exempt, such as basic foodstuffs. So too will public transportation,
education and healthcare services. Other important goods such as electricity will be partially
exempt. BR1M payments and income tax reductions will ensure that lower and middle income
groups will be not be burdened by the GST. It is important to also remember that small
businesses, whose annual turnover of taxable supplies does not reach a prescribed threshold, are
excluded from collecting GST. Together these will limit the impact of the GST on hard working
families.

The GST is not a new phenomenon. As have been mentioned, it has been a long journey of about
30 years to get to where we are. More than 160 countries have already implemented a GST, 160
countries cannot be wrong. Amongst ASEAN nations, only Brunei and Myanmar have not yet
introduced the tax. Moreover, Malaysias 6 percent rate is one of the lowest in the world.

Ladies and Gentleman,

The government has taken a number of steps to ensure the GST is properly implemented. 100
million ringgit has been allocated to conduct a nationwide awareness and training program. We
are also providing a package of incentives, worth 150 million ringgit, to ensure a smooth
transition to the GST for Small and Medium Enterprises. This includes financial assistance and
tax incentives for the purchase of GST related software and hardware, as well as other forms of
deductions.

To ensure that businesses do not impact Malaysian consumers, the government has strengthened
enforcement action through the National Pricing Council, the distribution of Shoppers' Guide,
and making the hypermarkets act as price setters. In addition, the Price Control and Anti-
Profiteering Act 2011 will be used against those profiteers that break the law.

Ladies and Gentleman,

it is my responsibility to make the right decisions for all Malaysians. I believe that the GST is the
right tax and probably at the right time for Malaysia. It is an important reform that will help us
build a stronger, more sustainable and transparent economy. This new tax will help drive our
national development forward. By reducing our deficit, investing in our future, and increasing
the competiveness of our businesses, our economy will grow stronger. Together we will not only
achieve developed nation status, but also secure a prosperous future for generations to come.

Ladies and Gentlemen,

I would like to thank all of you for being here and participating in this seminar. I am delighted
that it has received overwhelming support. Todays event is part of our continuous efforts to
ensure the GST is success. I have been saying the successful implementation of GST depends on
2 aspects: (1) you must get the technical aspect right, in all aspects; and secondly you must get
the communication right. So both are very essential elements in ensuring a successful
implementation of GST, and for GST to have the all-round support from all Malaysians.

I would like to appeal to all Malaysians particularly businesses please register as soon as
possible. The sooner you register, the sooner you understand what GST is all about. And the
sooner you prepare for the inevitable, the better you will be for your businesses.
Thank You.