The impending implementation of the GST or Goods and Services Tax in Malaysia has been one of the most talked about issues since it was announced by the Prime Minister of Malaysia during his Budget 2014 speech. A lot of speculation has been going around since on whether there will be an increase in price of goods and services while many has taken precautionary steps to spend less come 2015.
How then will the GST affect Malaysians?
The first issue that needs to be explained is that the GST will be introduced in April 2015 and it will effectively replace two other taxes which Malaysians are used to. They are:
Sales Tax = 10%
Service Tax = 6%
This means that you will no longer be charged the 10%+6% tax which usually comes in your receipt when you are dining in restaurants and such. The GST, however will replace both the taxes and this will NOT be applicable for basic necessities.
In Malaysia, there will be 3 categories which the GST will be implemented. The first type is known as the Standard-Rate GST. Goods and services which fall under this category will have a flat-rate of 6% tax charged and it will be applied on every stage of the supply chain meaning that it will apply from the raw material to the finished product. The business will collect the tax and paid to the government directly.
The second category is the Zero-Rated GST which means that there will be no GST imposed on the consumer. It is known as basic necessities which include food items like meats, cooking oil and the first 200 unit of electricity per household monthly.
The third category is known as exempt-rated GST where the consumer will not be charged any taxes which will affect residential property and services in the health care industry.
Ultimately, GST is a progressive tax system which will benefit everyone in terms of the supply chain and more so as an alternate income generator for the government. While it will take some effort to successfully implement this system, once it is in place, it will be a lot more effective than the current Sales and Services taxation system.