The Government had conducted social impact studies which shows that consumers will most likely bear some slight additional tax burden depending on their consumption pattern and the rate of GST to be fixed. To ease the increase in tax burden, tax and non-tax package may be given. However, basic items such as rice, poultry, meat, vegetable, flour, cooking oil, sugar, residential and agricultural properties, education and health services will not be subjected to GST.
The reason for introducing GST is to make the taxation system more effective, efficient, transparent, business friendly and capable of generating a more stable revenue. In formulating the model, the Government is very much concerned that it will not burden the rakyat especially the low and middle income group. As such, a number of goods and services which are essential to the low and middle income group have been proposed not to be subjected to GST.
The first hurdle is that tax is not a popular subject matter and generally nobody likes to be taxed or rather the word "tax" is taboo to many. However, governments all over the world need to impose tax in order to get the revenue to provide their citizens with their social needs (infrastructure, health and education services), industrial growth which results in employment opportunities, security, etc. People find it difficult to accept the GST due to lack of knowledge on GST and how it benefits them. The second hurdle is the level of knowledge on GST. It is not easy to educate consumers on GST as the moment you mentioned that GST is a form of tax you will first be faced with a wall of resistance. Thus, GST and its benefits have to be explained to them continuously in order to avoid or eliminate whatever misconception or the wrong representation provided to them regarding GST. Towards this end, the Government has emphasised that the rakyat have to understand GST before it is actually implemented. Currently, people are also not aware that the GST will replace the current sales tax and service tax. In fact, many people are not even aware that they are paying sales tax and service tax on a lot of goods and services because of its single stage nature.
Currently, the 12 million workforce are already paying tax in the form of both income tax and SST, or SST only. GST is not a new tax, it is merely a tax to replace the existing consumption tax consisting of the sales tax and service tax. Thus, the issue of forcing the 12 million workforce to pay tax does not arise.
The reasons for increase in revenue collection under the GST compared to SST are:
- broad based tax
- increase in level of compliance
- a more efficient revenue collection.
As a result of a broad based tax, consumers will most likely bear additional tax burden depending on their consumption pattern and the rate of GST to be fixed. However, tax and non-tax package may be given to ease the increase in tax burden.
In principle, the above statement is incorrect. This is because GST is a consumption tax which is imposed on the value added at every stage of the supply chain. Although GST is imposed at every stage of the supply chain, businesses can claim the GST incurred on inputs. Such mechanism implies that the end consumer only pays GST at the rate of 6% and not 24%.
The mechanism of calculating GST are as follows:
The table below shows the example of GST calculation at every stage of supply chain at the rate of 6% and the profit margin of 20%.
| (1)Cost | (2)Output Tax | (3)Input Tax | (4) GST Paid(2)-(3) | (5)Selling Price(1)+(2) | |
|---|---|---|---|---|---|
| Manufacturer | RM50 | RM3.50 | - | RM3.00 | RM53.00 |
| Wholesaler | RM60(RM50+20% margin) | RM3.60 | RM3.00 | RM0.60 | RM63.60 |
| Retailer | RM72(RM60+20% margin) | RM4.32 | RM3.60 | RM0.72 | RM76.32 |
Total GST collected by Government = RM3.00 + RM0.60 + RM0.72 = RM4.32
GST will be imposed at every stage of the supply chain beginning at the manufacturing until the last stage that is consumer. The calculation mechanism are as follows:
Manufacturing stage:
Sells to wholesaler at the price of RM50 and GST rate at 6%
GST on sales paid to the Government is RM3.00 (RM50 x 6%)
Selling price to wholesaler is at RM53.00 (RM50 + RM3.00)
Wholesaler stage:
Wholesaler purchases from manufacturer at RM53.00 (RM50 + RM3.00 GST)
RM3.00 is the input tax incurred by the wholesaler
Wholesaler sells to retailer at a margin of 20% which is RM60 and GST rate at 6%
Selling price to retailer is at RM63.60 (RM60 + RM3.60 GST)
RM3.60 is the output tax charged by the wholesaler to the retailer
After offsetting the output tax of RM3.60 against the input tax of RM3.00, the GST payable to the Government in the GST return is RM0.60 (RM3.60 - RM3.00)
Retailer stage:
Purchase from wholesaler at RM63.60 (RM60 + RM3.60 GST)
RM3.60 is the input tax imposed on the retailer
Retailer sells to consumer at a margin of 20% which is RM72 and GST rate at 6%
Selling price to consumer is at RM76.32 (RM72 + RM4.32 GST)
RM4.32 is the output tax charged on the consumer
After offsetting the output tax of RM4.32 against the input tax of RM3.60, the GST payable to the Government in the GST return is RM0.72 (RM4.32 - RM3.60)
The Government will take strict measures to ensure traders do not take advantage by using GST as an excuse to raise the price of goods for the purpose of making excessive profits. Among the measures that will be taken by the Government is the enforcing the Price Control and Anti-Profiteering Act 2011, intensify enforcement through the establishment of National Price Council, publication of the Shopper’s Guide as well as making supermarkets as the benchmark price (price setter). To ensure that traders comply with the regulations, imposition of heavier fines and penalties will be charged.
Tax education will be carried out on a continuous basis to the rakyat. Tax has been the country’s source of revenue for development purposes. The Government will eventually return the revenue collected to the people in the form of security, health, education and improved standards of living. The philosophy of paying taxes has to be instilled among the rakyat, especially the younger generation to contribute towards the development of the country.
The GST model takes into account the interest of the lower income group by making sure essential goods and services are not subject to GST. Being a more efficient and effective tax system, it will spur further the economy and this will benefit the rakyat in the form of more job opportunities and a higher standard of living. Thus, GST should not be seen in the light of price increase of goods alone but as a total package that will bring benefits to the people, business and the nation.
Currently, the rakyat is not aware that prices of goods and services include the element of sales tax and service tax. With GST, businesses should review the price of their goods or services and exclude the element of sales tax and service tax. Businesses and consumers have been informed on this matter through awareness programmes.
The Government will undertake the following measures to ensure savings by the businesses is passed on to the consumers:
- To fully enforce the provisions of the Price Control and Anti-Profiteering Act 2011. The Act empowers the Ministry of Domestic Trade, Cooperatives and Consumerism to monitor, control and take action on any price increase due to excessive profiteering
- To distribute shopper’s guide three months before and after GST implementation which will indicate the estimated percentage price increase or reduction of goods and services. Shopper’s guide will assist the rakyat in exercising their rights as consumers
- To get the cooperation of the hypermarkets to be the price setters of goods.
The treatment to exempt residential house is to reduce the burden of rakyat because house is a basic necessity to the rakyat. The treatment also complements the Government’s initiatives to build more affordable houses for those who qualify especially the lower income group. This will give a minimum effect compared to a situation where GST is charged at a standard rate on the residential house. The price of the residential house especially in big cities is very high where among the reasons is due to limited supply. As such, GST should not be used as an excuse for the price increase.
The public should not have any fear over GST. Firstly it is a form of consumption tax which has been implemented by more than 160 countries in the world whether they are of a developed, developing or less developed status. Secondly, where Malaysia is concerned, GST replaces the existing consumption tax which comprises of sales tax and service which are found to be less effective, efficient, transparent and business friendly. Being a consumption tax, it is only incurred by the man on the street only when the goods or services are consumed. If no consumption takes place, he does not have to pay GST.
The public may not be aware that currently sales tax at the rate of 10% or 5% is already embedded in the prices which they pay for most goods, for example electrical goods, clothes, shoes and household appliances as the sales tax is imposed at the manufacturers level or at the point of import. By the time the goods reach the consumers the sales tax paid at the manufacturers level would be cascaded into the sales price at each level of the distribution/supply chain. GST, unlike sales tax or service tax, is a multi-tier consumption tax which will be applied at every stage of the distribution/ supply chain. At every stage of the distribution/supply chain businesses are able to claim back as credit the GST paid on the goods and services which they have acquired for the purpose of their business thus eliminating the cascading effect suffered under the current consumption taxes. As such, for goods which are now subject to sales tax there should be a reduction in prices due to the elimination of the cascading effect. Consumers should also be better off as some basic essential goods eg rice, vegetables, cooking oil and fish are not subject to GST at all. However, there may be an increase in price of certain goods and services which are currently not subject to any sales tax or service tax. The increase should not be more than the GST rate proposed due to the fact that businesses can claim back the GST paid on their acquisitions.
Measures undertaken to enhance the rakyat understanding that they are currently paying sales tax and service tax are as follows:
- continuous awareness programme with consumers such as public consultation, forum and seminar
- increase publicity through all modes of communication (main stream and social media)
- upload information for consumers in GST Portal
- collaboration with consumer associations, NGOs to educate consumers
- roadshows held at shopping complexes, schools, community centre and other public places
Sales tax was introduced in 1972 whereas service tax in 1975. Since then the increase in sales tax rate has occurred only once that is in 1982, after 10 years of implementation from 5% to 10%. Meanwhile the service tax rate was increased only in 2011 after 36 years of implementation that is from 5% to 6%.
In comparison with countries that have implemented GST such as Australia, Japan and Singapore the increase in tax rate only happened after several years of implementation. Economic stabilisation, GST system effectiveness, people’s acceptance and the impact on the consumers affect the increase of the tax rate.
| Country | Implementation of GST(Year) | Tax Increase(Year) |
|---|---|---|
| Australia | 1999 | 10% (No increment after 12 years) |
| Japan | 1989 | 5% (No increment after 25 years) |
| Singapore | 1994 | 3% (No increment after 9 years) 4% (2003) 5% (2004) 7% (2007 until present) |
Out of the 160 countries that have implemented GST only 12 countries have reduced their rates and 55 other countries have increased their rates since implementing VAT/GST.
The average rate is 16.9%, the lowest rate is 5% (Japan, Nigeria, Taiwan, Iran, Canada) and the highest rate is 27% (Hungary).
The price displayed will be inclusive of GST.
The Government’s policy on providing subsidies is a separate matter from the imposition of GST.
The cost for education and health services will not increase significantly because the GST treatment on education and health is similar as the current treatment under the sales tax and service tax.
Secara asasnya, semua GST yang dibayar sebagai contoh pembelian mesin, bahan pembungkusan, elektrik dan lain-lain input boleh dituntut semula oleh peniaga. Ini bermaksud GST bukan merupakan kos bagi perniagaan dan tidak boleh diambilkira dalam penetapan harga jualan. Bagi barang yang tidak dikenakan GST seperti beras, ini bermakna GST tidak dipungut langsung.
Sistem GST yang bakal dilaksanakan telah disesuaikan dengan keadaan sosio ekonomi. Ini dapat dilihat dari segi penetapan kadar, mengecualikan pelbagai jenis barang dan perkhidmatan asas dan juga memperkenalkan pelbagai jenis pakej bantuan. Tujuan utama kebanyakan negara melaksanakan GST adalah untuk mewujudkan sistem percukaian yang lebih baik dan efisien. GST telah terbukti sebagai satu sistem percukaian yang baik, dan sesuatu yang baik itu haruslah diteladani dan diamalkan. Daripada 160 buah negara yang telah melaksanakan GST didapati negara-negara tersebut tergolong dalam status negara berpendapatan tinggi, sederhana dan rendah. Sekiranya GST bukannya satu sistem yang baik dan efisyen, pasti ada di antara negara-negara tersebut yang telah memansuhkannya.
Asas GST adalah lebih luas jika dibanding dengan cukai jualan dan cukai perkhidmatan. Ini bermakna kemungkinan pengguna perlu membayar GST ke atas barang atau perkhidmatan yang sebelum ini tidak dikenakan cukai jualan atau cukai perkhidmatan. Walau bagaimanapun, kesan GST yang akan ditanggung adalah bergantung kepada corak perbelanjaan rakyat memandangkan terdapat pelbagai barang dan perkhidmatan yang tidak dikenakan GST.
Penetapan 200 kWh adalah berdasarkan penggunaan purata oleh golongan berpendapatan rendah di mana Kerajaan tidak berhasrat untuk membebankan golongan ini. Kebanyakan daripada mereka yang menggunakan elektrik yang melebihi 200kWh terdiri daripada golongan yang berkemampuan. Kenaikan tarif dan pengenaan GST adalah dua perkara yang berbeza. Apabila industri membayar GST ke atas elektrik, ianya boleh dituntut semula oleh industri dan tidak menjadi kos pada perniagaan.
