About GST
GST (Goods and Services Tax), also known as VAT (Value Added Tax) in many other
countries, is an indirect tax
imposed on the spending of goods and services in each stage of production. In
short, GST is a multi-staged consumption
tax.
Even though
GST is imposed at each stage of production, the valuation of the product will not be affected as the tax does not become a part of the cost of
the product. The reason for this is because the GST paid on the business inputs
can be reclaimed.
Fundamentals
of GST
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GST in
Malaysia
GST
had already existed for a relatively long time. However, it was only until the
year 2005 that GST was announced for the very first time in Malaysia. It was
scheduled to be implemented in 2007 but it was delayed as more feedbacks were
required from the public before it could be officially implemented. Finally, on
October 2013, the Malaysian Prime Minister announced that GST will be implemented
starting from April 2015 onwards.
Ever since
the announcement of GST was made public, many eyebrows were raised. Most of the
general public are wondering as to why the government is implementing GST when
they are already have a sales tax to pay for most of the goods they purchase.
The
insufficient knowledge about GST has caused many individuals to be misled into
believing that GST is a new tax that they would have to shoulder and this is
one of the reasons why the implementation of GST have been recieving negative
receptions.
Hence,
GST should NOT be mistaken as a NEW TAX.
It is a new taxation system which replaces
the existing sales tax.
To
understand more about GST, we have drawn up a few reasons as to why the
government should implement GST
The
Reasons:
·
To Prevent Double Taxation
GST will help pevent consumers from being taxed twice as
the tax levied on each stage of production can
be reclaimed whereas sales tax are not
reclaimable. Thus, the GST paid in one stage of production will not be cascaded into the price at the next stage. As a result,
the consumer will only bear his share of tax and not the tax paid by
retailers/whole-sellers to the manufacturer.
·
To Reduce Budget Deficit
As a developing country, the national debt will always be
rising as the government is constantly improving and building new infrastructure.
With the implementation of GST, the government is able to generate additional income to reduce the debts when consumption
increases.
·
To Improve Transparency
Unlike sales tax, consumers will now know exactly
whether the goods they consume are subjected to tax and also the amount that they
would have to pay for.
·
To Improve Competitiveness in the
Global Market
Exports are considered zero-rated and will be exempted
from GST. This will mean cheaper exports which will certainly improve our
country's competitiveness and boost our economy.
Zero-Rated
Goods
Zero-rated
goods are goods that will not be taxed by GST. Heres a list of goods and
services that falls under this category
Category
|
Example
|
Food Stuff
|
Rice, Sugar,
Table Salt, Plain Flour, Cooking Oil, Vegetable
|
Live Stocks
|
Live animals,
Cattle, Goat, Buffalo, Sheep, Swine
|
Poultry
|
Live and
unprocessed meat, Eggs (Chicken & Duck )
|
Merit Goods
|
Education,
Healthcare (Medications)
|
Utilities
|
First 200
units of electricity, First 35 m3 of water supplied
|
Fuel
|
Ron 95, Diesel,
LPG
|
Exports
|
All goods and services that will be exported
|
How will
students be affected by GST?
·
Education fees are exempted from
GST
Education falls under the category of zero-rated good and
will be exempted from GST. Hence, education fees will be least likely to rise. The rationale behind this is to ensure that
more student will be able to afford better education without burdening
themselves with a large debt after graduating.
·
Affordable Basic Goods
(Necessities)
Basic goods such as basic
food, vegetables, and fruits are also considered as zero-rated goods and
will be exempted from GST. This will
most likely benefits students who are staying by themselves as they are more
dependent on and likely to consume these basic food than dining in restaurants.
·
Rentals will not be charged with
GST
According to a recent statement
released by the government, the income from the property rentals paid by
tenants staying there as a home will
be exempted from GST. Only rentals for tenants who uses the
property for commercial purposes will be
taxed. Thus, there will be no reasons for property owner or landlords to
raise the price of rentals for students.
·
Cheaper Cars
One
thing that we can expect after the implementation of GST is cheaper cars. As
students, cars are becoming a popular mode of transportation. Once GST is implemented, it will replace the existing sales tax of 10% with a lower tax of 6%. This
will certainly make cars more affordable.
