Monday, October 15, 2012

Is GST the way forward?

Are Malaysians ready for the Goods and Services Tax - the GST? Many are apprehensive about it's implementation but is there reason to be so? If so, it just shows how little we know of it and its benefits. If the GST has been successful1y implemented in 146 countries (a source quotes 150), Malaysians should have nothing to worry about its implementation in the country.

France is the first country to implement GST from between 1948-1959), then came Brazil, Ivory Coast, Denmark, Germany, Netherlands, Sweden, and Uruguay between 1960-1969. On this side of the world, Indonesia, Philippines, Thailand, Vietnam, Singapore, Taiwan, Japan have GST in place and farther afield Australia, New Zealand, India, Sri Lanka, and China. Source.. - where you can also find percentage of GST per country.

Currently, we are paying a sales tax of 5% to 10% and service tax of 6% on goods and services on top of the total bill. Malaysia is looking at a GST rate of 4% which actually means we will be paying less than what we are currently paying with the GST system.

Additionally, with the sales tax removed for essential items, food prices can even come down. The thing to remember is that GST will not apply to essentials like our daily staples of rice, cooking oil, meat (beef, mutton, pork, chicken for instance) and so forth. For seafood lovers, lobsters, crabs, oysters and scallops are also exempted.

Malaysia, which has a population of 28 million, approximately 12 million people are in the workforce but only 1.7 million pay taxes. GST could be a major source of indirect tax revenue for the country. As for the consumer, as GST is basically a consumption tax, the more you spend, the more you pay. Likewise, if you spend less, you pay less GST.

GST exemption also extends to critical services such as public transport, toll, taxis, hospital and healthcare, schools, residential property, land for agriculture use, and financial services. In other words, the lower income group will not be burdened by the GST.

Many of us are unaware that we are already paying taxes on items like clothes, shoes, non-essential food items and furniture and sometimes as high as 10%. These taxes have been included in the price of goods. Under the GST system, the sales and service taxes we have been paying all this while, will be replaced with a one-time consumption tax, the GST.

So what's in it for the manufacturer, supplier and wholesaler? They get a refund from the Government on the GST as they have already paid a tax to buy raw materials, parts and utilities used, to produce their goods. Thus, it is the end user or customer who pays the 4% GST.

With 146/150 countries already implementing the GST, it is perhaps only a matter of time before Malaysia follows suit. To allay fears and address concerns, the government would need to go down to the people on why GST is the way to go.

More information on GST from the Royal Malaysian Customs website.

- Is GST the way to go?
- Consumers assured of a fairer tax system

More on GST:
Breaking the tax taboo


  1. Anonymous5:10 PM

    Can lah... Take, take. Just make sure it is put to good use, not wasted on unimportant things or go into somebody's pockets.

    Otherwise, school fees free, books free, everything free, give money to students, give to buy books etc...etc...etc...and every year income tax reduced - where is the money going to come from? It does not grow on trees!

    In order to save, don't spend. Be prudent in everything you consume. JIMAT!!! Want to spend, have so much money, then pay GST lor...simple as that!

    Most countries have it since long long ago - tourist can claim back when leaving the country but I never bothered. I think NZ almost 15% GST *faints*

  2. "12 million people are in the workforce but only 1.7 million pay taxes." The rest are too poor? Ouch.

    Sounds like South Africa: 1,25 million people (out of a total population of 50 million) are responsible for 82% of all income tax collected. Quadruple ouch.

    PS: What about books? Will books be tax-free? They should be, but they never are. :(

  3. Anonymous8:50 AM

    There is tax-deduction for the books, magazine, journals that you buy up to RM1,000.

  4. Anonymous8:53 AM

    Plus tax deduction up to RM500 for broadband subscriptions, a deduction of RM3,000 for every computer (including ipad) you buy every 3 years, sports equipment up to RM300 etc...etc...etc...