Upload
jo-ann-ang
View
21
Download
1
Tags:
Embed Size (px)
DESCRIPTION
A research paper on the affect of GST in Malaysia
Citation preview
Introduction to GST.
Charged at rate 6% per item registered
under GST.
What is GST?
Multi stage taxation
concept(supply chain)
-VAT(tax-on-add-value)
Implemented starting the 1st
April 2015.
Only charged on standard-rated goods and imported goods.
Not charged on exempt goods and zero-rated goods.
The difference between GST and SST.
Single versus multiple stage of taxation.
Goods and Services subjected to tax.
Tax payment and accounting period.
Imported services and intangibles.
Why is GST better than SST?More comprehensive - GST does not inherent weaknesses
under the present tax system.Exp :cascading tax, double tax
More effective - increase tax compliance thus easier to administer.
More transparent - All records and documents related to the business are only kept by the GST auditor in the business premise.
In many countries, GST are implemented due to
The existing consumption sales tax is unsatisfactory
A reduction in the rate other taxes is sought
The existing tax system has not kept pace with the development of the economy
GST will over these weaknesses in Malaysia:
Tax cascading and tax compounding
Issue of transfer pricing and value shifting
No complete relief of the tax on goods exported
Discourages vertical integration
Bureaucratic red tape
Price Effects on ConsumersBasic food stuff will be zero rated
Public amenities will be exempted
Production cost is lower because GST paid on input is claimable by businesses
Some items will increase as there were no taxes charged before this
ExampleA camera manufacturing price is RM30 and
retail price is RM40,hence profit is RM10 and consumers pay no tax
With 6% GST, the manufacturing price would be RM 31.80 and retail price would be RM42.40 and consumer pays RM2.40 tax now.
TYPES OF SUPPLY
Types of supply Output tax Input tax
Standard-rated 6% Claimable
Zero-rated 0% Claimable
Exempted No GST charged Not claimable
STANDARD RATED
Manufacturer claims back GST on input
Consumer pays
6%GST only
Wholesaler claims back
GST on input
Retailer claims back
GST on input
Manufacturer
Wholesaler
Retailer Consumer
GST AT 6%
Supply Chain for Standard Rated
Selling price : RM120GST : RM7.20Total selling price :RM127.20
Purchase cost : RM100GST : RM6*Purchase price : RM106
Manufacturer Wholesaler
Retailer Consumer
*Note: Wholesaler claim input tax RM6
Value-Adding Activity
Added Value : RM20(Add GST : RM1.20)
ZERO RATED
Manufacturer claims back GST on input
Consumer does not pay any
GST
Wholesaler claims back
GST on input
Retailer claims back
GST on input
Manufacturer
Wholesaler
Retailer Consumer
GST AT 0%
Selling price : RM120GST : RM0Total selling price :RM120
Purchase cost : RM100GST* : RM0Purchase price : RM100
Supply chain for Zero Rated
Manufacturer Wholesaler
Retailer Consumer
*Note: Wholesaler can claim input tax
Value-Adding Activity
Added Value : RM20
Examples of Zero Rated
0%
First 300 units of electricity per month for
domestic use only
Exported goods and services
Infant milk
Water for domestic use only
EXEMPT SUPPLY
Supplier Private hospital Consumer
Supplier claims tax
paid on input
Private hospital cannot
claim tax paid on input
No GST imposed on the supply to consumer
GST AT 6 % NO GST
Supply Chain for Exempt
Selling price : RM126GST : RM0Total selling price :RM126.00
Purchase cost : RM100GST* : RM6Purchase price : RM106
Manufacturer
Private Hospital
Consumer
*Note: Private Hospital cannot claim input tax
Value-Adding Activity
Added Value : RM20
Examples of Exempt Supply
RAIL TRANSPORTATION :KTM, ERL, LRT, Monorail
BUS TRANSPORTATION
-school, express, stage
RESIDENTIAL HOUSES FINANCIAL SERVICES
HEALTH AND EDUCATION SERVICES
GSTXWATER TRANSPORTATION
-ships, ferries and boats
The Supply Curve for Cameras
GST acts as a cost for suppliers, hence cost increase, supply would decrease
How GST affects the economy…
Positive impact
1. Reduction of cost in business
2. Lead to more competitive pricing
3. Makes our export more competitive as exports to be zero rated
4. Increase in gross domestic product
5. Reduce shadow economy activities
6. It is a tool to manage the economy
Might not reduce in consumption
1. Prices of certain goods and services might be lower.
2. Change in consumption pattern
3. A lot of basic necessities are not subject to GST
4. GST is a replacement tax
5. Input tax in credit mechanism should reduce business cost
Advantages of GST….
1.Lower cost of doing business
- Some business paying multiple taxes
- With GST business can benefit from recovering input tax
2. Improved standard of living
- Revenue from GST will be use for development purpose
3. Fairness and equality
- Taxes are levied fairly among all the business
4. Increase global competiveness
- Price of Malaysian exports will become more competitive
on the global stage.
5. Fair pricing
- GST eliminate double taxation under SST.
Disadvantages of GST….
1. low and middle income group will be affected badly
- When prices of some good go up and money will be the major issue for the specific group
2. There isn't any assurance that the price of good and
services will increase
- Government are helpless in controlling price of essential
items.
Conclusion ….
As a conclusion, the overriding rationale to introduce the GST is to modernise our tax system and to overcome the inefficiency of the indirect tax system in the country.
From the studies done by the Ministry of finance and Customs, it is evident that zero-rating and exempting has made the Malaysian model a progressive one rather than a regressive one.
GST based on spending. If the spending is higher, then tax charged will be more. Some items may be slightly more expensive and cheaper.
Furthermore, government income will increase. This will enable further development and budget control to the country, other than relying just on petroleum or income tax revenues.
Even though, government introduce GST they are always there to help low-income people by designed a compensation packages to offset any additional tax burden.