What Is GST?
Goods & Service Tax (GST) is a taxation system to broaden and significantly improve the current SST ( Sales & Service Tax). GST will replace the SST by April 1, 2015. GST is a tax on domestic consumption. It is charged and accounted for at a rate of 6%. It is charged on goods and services that are supplied in Malaysia and imports.
GST is collected by traders and businesses who has registered with the Customs. For importation, GST is collected by the Malaysian Customs at the point of importation.
A majority of countries have also implemented GST around the world. Like them, Malaysia has also taken the step to exempt a certain category of goods and services from the GST. The exempted goods and services will be explained in “How Does It Work” segment below.
How Does It Work?
GST, once implemented, will be split into three categories.
1) Standard Rated Order (6%)
6% flat rate charged on goods and services other than those listed in Zero-rated supply and Exempt Supplies Order. Input tax is claimable. upon payment of output tax.
2. Zero Rated Order (0% GST)
In this order, GST is not applicable on all levels, which means no GST for the following categories:
1) Basic Foods: Rice, sugar, poultry, eggs, fish, prawn, meat, mutton, vegetables and etc.
2) Utilities: 300 units a month to residential users (Electricity and etc)
3) Supply of treated water to domestic users
4) Exported Goods and Services
5) Port and Airport Services
3. Exempt Supply Order (0% Output tax, Input tax non claimable)
The Exempt Supply Order applies to:
1) Healthcare Service
2) Education Service
3) Childcare Service
4) Passenger Transport Services
6) Financial Services
7) Land For Agriculture/ Residential Use
GST is implemented because of two basic ideas. The first one is to overcome the weaknesses in SST while the second one is to enable a more comprehensive and transparent taxation system.
Weakness Of SST
1) Double taxation
2)Easy to Defraud
3) Collection Of taxes not as projected
4) Not transparent
5) Narrow tax base
6) Tax embedded in goods exported
7)cascading effect due to multiple tax
8) pyramiding effect
Advantages to GST
1) Self policing
2) Transparent ( Charged at Every Level and Seen in Invoice)
3)Makes it harder for corporations to transfer the taxation costs to the people
4)Efficient Implementation and Collection
The Price That We Must Pay
Compared to the SST, GST has a lower rate ( 6%). So in an ideal world, we would be enjoying a significant decrease in the amount of money we spend. However, we also have to be realistic. The cost for companies to implement this taxation system will be taken into account. Compliance software, registration, fines, rising electricity for non residential areas and upgrading to products that are GST compliant would mean a possible increase in prices for several categories. It is however, not a price hike that cannot be afforded by the Malaysian citizens. We are, realistically, looking at a small price hike for several products. A majority of it will be absorbed by the large difference of rates between the GST and the SST.
The first thing we have to consider is that spotlight must be on how the corporations will deal with GST. If they act responsibly, we will be able to enjoy a much better economic environment than we have ever had. Any unfair hikes in prices could be dealt with. This is why we have consumer associations and other kinds of bodies.
The second thing is that we can clearly see that the GST will enable the government to have more resources at their disposal. With the implementation of this system that increases their revenue, they will be more liable to create more infrastructures and be more answerable to the people. Getting more people to pay their taxes would make the country contribute more to the government, and that allows the people to expect to see bigger changes and more significant improvements in the country.
Comments & Critics
The time has come for Malaysians to grow up. The difference between an armchair critic and an active participant and citizen of the country is the knowledge we have. The more informed we are, the more we can strive to improve conditions. In this modern age where information is at our fingertips, it is too much of a waste to be ignorant.
Read up. Validate. Provide constructive criticisms. Be intelligent and reasonable in rebukes and rebuttals. Educate others. Let’s not point fingers and blame while we do nothing but talk. Let’s work together to make this country a better place.
Information and a deeper understanding of GST came from interviewing the following persons:
Jacob Kumar is a professional with over 21 years of experience in finance, accounting, administration and operations. Jacob has strong technical knowledge and management skills obtained through experience in working different multinational industries. He has attended a number of courses on GST organized by the Royal Malaysian Customs.
Jacob Kumar is currently the Principal Manager specializing in GST. He is actively involved in numerous GST implementations for large and small enterprises. He has also been to Taiwan, India, Pakistan, China, Indonesia, France, Netherlands and USA and is well versed in VAT of the respective countries in his capacity as APAC Financial Controller in a leading multinational company.
Jacob Kumar has conducted various public seminars and in-house training on GST mechanism and implementation. Jacob is also a certified accounting and finance manager (FCAM, UK).
Richard William is the founder and lead partner of RW William, a chartered accounting firm based in Petaling Jaya with branches and affiliates in Kuala Lumpur, Penang, Seremban and Johor Bahru.With over 23 years of extensive experience in audit assurance and corporate advisory, Richard has advised local and international clients across a broad range of industries – including financial services, consumer products, industrial products, real estate, and oil and gas amongst others.
Richard has been actively involved in advising various clients in GST Mechanism, Concept and Implementation since mid 2013. He has conducted various in house training for clients on GST matters. He has successfully completed the GST Training module and exam conducted by the Customs Malaysia.
He is a member of The Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants (MICPA), Chartered Tax Institute of Malaysia (CTIM) and Institute of Internal Auditors of Malaysia (IIAM).
To contact RW William, the chartered accounting firm, please visit www.rwwilliam.com.my for their established services.