Gst on Malaysia Economy

Table of Content

 Executive Summary

This Assignment talk about the effect of GST on Malaysia economy. GST is a hot topic in Malaysia now and we should know what is GST and its Effect and Impact on Malaysia economy.

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GST is charged at every supply chain on the industry. The diagram above illustrates example of GST mechanism. A manufacturer sells a product.

Introduction

Malaysia Government had implemented GST on 1 April 2015. GST is known as a goods and services based on consumptions. In other countries likes Australia it is called as Value added Tax (VAT).Government implemented GST in order to replace the long implemented sales and services tax (SST).GST is a more efficient and effective taxation system compare to the sales tax and services tax. GST is also very essential to replace the SST in order to eliminate the weakness of SST system. All Taxable goods and services that produced in the country will be charged and collected under GST. GST can be charged  if the business is register under GST.GST is charged on goods and services at each level of supply chain .GST adopt a mechanism whereby GST charged on the output of the business is to offset GST paid on the good or services acquired as input by the business. There are standard-rate supplies, Zero-rate supplies and exempt supplies. Standard-rate supplies are good and services charged on a standard rate and GST collect from consumers is pay to government. A Businesses  not able to registered if its annual turnover of taxable supplies does not exceeding RM500, 000.Hence, such businesses cannot  collect GST on the supply of goods and services sold to their customers. However, businesses can apply for registered voluntarily. Until todays, many countries had implemented GST, including Australia, Singapore and India.

(Royal Malaysian Customs)

Question 1

Discuss the possible effects of Goods and Sales Tax (GST) on Malaysia economy.

Increase in Gross Domestic Product
GST is a more efficient and effective tax system than present system. Consumers can know whether product they purchase is subject to tax or exempt from tax and amount they pay for it.  Also, implementation of GST can stimulate the economic growth.  GST will also increase the government profit from the collection of GST because the revenue increases not just from Malaysian but also from foreigners. Therefore, GST can increase government revenue from the tourist industry, when tourists spend money on goods and services that made in Malaysia and the overall revenue will be increase. This will have a direct effect on the Malaysia economy and increase in country’s Gross domestic product (GDP).  (Official portal of MINISTRY FINANCE OF MALAYSIA)

Price-Competitive In Foreign Markets
under the long-implemented service tax and sales tax, when tax is already pay at one stage in the supply chain, the same amount of tax will be considered as cost and passed on to the next stage as the sales price. So that consumers will be pay higher price in the end. However, under GST this will be removed because each party in supply chain can get the refund of the GST paid to the government. That means they can claim back input tax. In this way, the tax element won’t become the cost of the product. When the cost of the production falls in the domestic markets, producer will makes more goods and services as the cost of production falls, so this will affect Malaysian goods and services more price competitive in the foreign markets. And under the GST system, all exported goods and services is zero rated and this is good for exporters who competing with producer abroad using a lower cost structure (NBC group)

Standard   Of Living Improved
GST can affect the standard of living of Malaysian businesses and consumers because the government have more money to spend at development such as institutions, health facilities, education and social infrastructure etc. due to the increment of revenue from the collection of GST. Government can provide needs of the public and better healthcare system and welfare service for the poor with the revenue collect from GST. Hence, GST can improved the standard of  living of Malaysian by using the revenue collect from GST to investing for existing improvement and future development. GST enable Malaysian have a better management of its finance and improve standard of living and in order to become a successful country likes Australia, Singapore and Korea.
(Official Portal of MINISTRY OF FINANCE MALAYSIA)

Question 2

Compare The Effects Experienced By Malaysia With Any Other Economy Of Your Choice.

The difference of  GST in Singapore and Malaysia.

1)GST Rate in Malaysia and Singapore

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GST implemented in Singapore on 1 April 1994. When introduced, the initial GST rate was 3%. And it was increased to 4% on 1 Jan 2003, and to 5% on 1 Jan 2004, and it was increase to its current GST rate 7% on 1 July 2007.The initial rate was not focus on generate government revenue.it was to let Singaporean adjust to the tax system. Unlike Malaysia, the initial GST rate is 6%, Malaysian are hard to adjust to the tax system because the initial GST rate is way too high for them.(INLAND Revenue Authority Of Singapore)