Just last week, Prime Minister Datuk Seri Najib Razak announced the implementation of the Goods and Services Tax (GST) during the Budget 2014 presentation. Despite intense backlash from the rakyat, the Prime Minister opted to introduce the GST to replace the newly-abolished sales and services tax.
Before you go berserk with the GST introduction and how to manage your finances, here are 8 things you should know about it:
1. The goods and services tax (GST) is a tax on consumption, or spending. It is imposed on goods and services at every production and distribution stage in the supply chain.
2. The Goods and Services Tax in Malaysia is only set at 6%, whereas the current tax regime – the Sales Tax and Service Tax (SST) – are set at 10% and 6% respectively. With the current tax regime abolished, this should mean that your purchases should be cheaper.
3. By adopting the new GST regime, Malaysians can enjoy up to 40 basic food necessities like rice, sugar, milk powder and flour, will be listed as zero tax items. Government services like public transportation, including sales and purchase of property or rental of property will also be GST exempted.
4. Majority of the public do not realize that those who do not pay income tax still pay high SST on goods sold by retailers. This is because consumers aren’t aware that tax has been already embedded in the price of the goods and services we buy.
5. The GST is said to ease the burden on the poor as a good sum of the products they purchase will fall under zero tax items.
6. Economists say that with the modified GST, the public can decide whether or not they want to pay consumption taxes by preparing meals with essential items that are exempted from GST.
7. The 6% Goods and Services Tax is among the lowest in ASEAN countries. Indonesia, Vietnam, Cambodia, Philippines and Laos capped in at 10%
8. The Malaysian government is implementing the GST to seek additional revenue to the current budget deficit. Since the government spends more than it earns, the GST could help narrow fiscal deficit as the rate of consumption in the country increases.
Judging by the list, it appears that the GST may actually be good for the country since the SST will be abolished. The Goods and Services Tax (GST) will be effective on 1 April 2015 onwards.
Tell us what you think about the implementation of the GST in the comment section below.
