Wednesday, April 23, 2014

GST: Is it Good or Bad?

Much has been said about GST or Goods and Services Tax, known also as VAT (Value Added Tax) which is to be implemented by 15 April 2015.  Some view GST as unnecessary and an additional burden to the people but some chose to take it indifferently.  Many, though, don’t really understand what it is.

The truth is, there are always two sides of the story, whereby the ‘good’ or ‘bad’ depends on which angle you are looking at.

From a businessman point of view, GST is most welcomed as it eases the administrative procedures by allowing businesses to claim their Input tax credit by way of automatic deduction in their accounting system.

Any type of businesses ranging from sole proprietary, company, unions, club, partnership, individuals with more than RM 500,000 taxable sales are required to register for GST.

GST is imposed at each level of the supply chain but 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 step in the supply chain.
Input tax is the GST charged on the purchase of goods and services used in the business activity. Output tax on the other hand, is GST charged and collected on sales/supplies of goods and services. Input tax credit means tax input claimable by businesses registered under GST.

In a much simpler words, GST is a good thing for businesses.

Whatever is good for business is usually good for the country and even though the ordinary Malaysians, the consumers, the non-business community may be skeptical over GST but in the end, whatever is good for the country, will bring goodness to everybody.

It is a fact that the final GST tax burden will ultimately will be borne by consumers but it only becomes a burden, if we were to look at its monetary form directly.

Taking a look from a wider point of view, we will be able to see that GST prevents double taxation as Streamlined sales tax (SST) could lead to double taxation that can prove to be a demerit to consumers.

Tax compliance is also expected to be increased by the implementation of GST and therefore, generate additional revenue at a projected amount of RM 1.0 billion compared to the existing sales tax and service tax.

The revenue generated from GST will eventually goes back to the benefits for the consumers, the ordinary people or the non-business community, through nation building programs, facilities and infrastructure development.

Apart from that, GST serves as a more effective, transparent and business friendly system that could spur economic growth as well as increase competitiveness in the global market.  Thus, provides more business and job opportunities for the people.

It is important to note that Malaysian Government is taking cautious steps in imposing GST so that consumers will not be burdened by higher costs.  As such, 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 life insurance.

All in all, GST is good for everybody as it will help increase revenue through tax compliance, increase the country’s competitiveness in the global market and provide more opportunities for Malaysians.

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