What is GST ?
Wednesday, 17 September 2014 | 08:24 | 0 Alien[s]
GST (Goods and Services Tax) is a tax where whatever goods and services used by consumers contain elements of tax. That is why it is also known as the consumption tax . In other words, essentially far wider than the Sales Tax and Service Tax .
GST is a consumption tax and it is based on the concept of added value. GST collected from customers on behalf of the government by business organizations that are registered with the tax authorities.
Before panicking, we must first understand what is GST.GST is known as value added tax (VAT) in many countries is a multi-stage consumption tax on goods and services. Tax will be levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution.
Malaysian Government is taking cautious steps in imposing GST so that consumers will not be burdened by higher costs. Therefore Malaysians won’t be paying GST for certain essential goods like unprocessed meat, cooking oil, sugar and essential services like public transportation electricity, education, healthcare, toll, financial transactions and live insurance .
Why GST?
The main reason we need to pay taxes is to enable the government to finance socio-economic development; which includes providing infrastructure, education, welfare, healthcare, national security etc. 90% of the world’s populations are exposed to GST, including China, Indonesia, Thailand, Singapore and India.
GST is part of the Government’s tax reform programmed to enhance the effectiveness of the existing taxation system. Its serves as a more effective, transparent and business friendly system if implemented correctly. This could spur economic growth as well as increase competitiveness in the global market.
GST prevents double taxation as Streamlined sales tax (SST) could lead to double taxation that can prove to be a demerit to consumers.
Various benefits that GST can offer to consumers and businesses:
• Improved Standard of Living
• Lower Cost of Doing Business
• Nation-Building
• Fairness and Equality
• Enhanced Delivery System
• Increase Global Competitiveness
• Enhanced Compliance
• Reduces Red Tape
• Fair Pricing to Consumers
• Greater Transparency
Comparative with 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.
To further encourage international business, exports of goods and services are not subject to GST (subject to tax at zero-rate).The government is very clear about this to ensure that exports are more competitive in the international market.
GST will be imposed at every 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. Therefore, 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 step in the supply chain.
