About GST – Goods And Services Tax Malaysia
GST(Goods and Services Tax) or VAT(Value added tax) is a consumption tax which implemented in over 140 countries and many developing country such as Malaysia is going to transform their tax revenue bases from direct taxation to consumption taxes which is GST (Goods and Services Tax) in year 2011.
Goods And Services Tax will be borne by the end-user/consumer and is not intended to add burden to businesses. GST is actually a tax to replace our existing sales tax and service tax in Malaysia. The Government has proposed an intial GST rate of 4% which is among the lowest rates in the world. The VAT rate in Britain is 17.5% currently. Some basic necessities such as essential food will be zero-rated (0%) means that the certain items are exempted from GST. Many people believe that they will be heavily burdened by GST and trigger inflation indirectly.
For example, some people will think that when the manufacturer sells goods to the agent, he/she pays 4% GST, then agent sells them to wholesaler, another 4% tax is imposed. When the goods are sold to the retailer, another 4% is added. In the end, when customer buys goods, another 4% is levied again. That means, the consumer is paying 16% tax to the Government.
However, it’s not true at all because of some misconception. The GST system does not work that way, there is no double taxation or butterfly effect will be charged to consumers. To ease the burden of low-income group, the Government will not imposed on certain basic food and properties include rice, sugar, vegetables, eggs, meat, poultry, domestic transportation, residential property, private health, education and Government services.
GST works based on the affordability concept. You have to pay it if you buy food or services that fall into GST group. Actually, even now you are also paying for sales and service tax which are embedded in the price of goods and services and you may not realise about that. Anyway, we hope Malaysia Government will introduce special measures to help lower-income groups to minimise the adverse impact of GST on them.