Do You Undestand what is GST ?

What is GST

GST (Goods & Services Tax), which is also known as VAT or the value added tax in many countries is a multi-stage consumption tax on goods and services.

GST is levied on the supply of goods and services at each stages of the supply chain from the supplier up to the retail stage of the distribution. Even though GST is imposed at each 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.

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 in the supply chain.

GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except specific goods and services which are categorized under zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.

The basic fundamental of GST is it's self-policing features which allow the businesses to claim their input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government's delivery system will be further enhanced. 

Why GST instead of other higher tax ?

GST is a better and fairer tax system compared to SST (Sales & Service Tax) as GST will :

• Lower business cost
  Under the current system, some business pay multiple taxes and higher levels of tax-on-tax (cascading tax). With GST, businesses can benefit from recovering input tax on raw materials and incurred expenses, thus reducing costs.

2. Increase global competitiveness
   Prices of Malaysia exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supplies chain. This will strengthen our export industry, helping the country progress even further.
3. Enhance compliance
   The current SST has many inherent weaknesses making administration difficult. GST system has in-built mechanism to make the tax administration self-policy and therefore will enhance compliance.
4. Reduces red tape
   Under the present SST, businesses must apply for approval to get tax-free materials and also for special exemption for capital goods. Under GST, this system is abolished as businesses can offset automatically the GST on inputs in their returns.
5. Equity
   With GST, taxes are leveled fairly among all the businesses involved, whether they are in the manufacturing, wholesaling, retailing or service sectors.
6. Fair pricing to consumers
   GST eliminates double taxation under SST. Consumers will pay fairer prices for most goods and services compared to SST.
7. Greater transparency
   Unlike 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.