FAQ Page
Goods and Services Tax or GST is a consumption tax based on value-added concept. Unlike the present sales tax or service tax which is a single stage tax, GST is a multi-stage tax. Payment of tax is made in stages by intermediaries in the production and distribution process. The tax itself is not a cost to the intermediaries since they are able to claim back GST incurred on their business inputs. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.
1. Is it a new tax?
No, it is a tax to replace the current Sales Tax and Service Tax (SST).
2. Why does the Government want to implement GST? Why now?
Many countries have adopted GST/VAT because they are dissatisfied with their consumption tax structure. This dissatisfaction falls broadly into one and possibly all of the following categories:
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
In the case of Malaysia, the introduction of GST is part of the overall Government tax reform programme towards making the taxation system more efficient, effective, transparent, business friendly and capable of generating a stable source of revenue. GST is to replace the current consumption tax comprising of SST.
Based on the study conducted by the Ministry of Finance, GST can overcome the various inherent weaknesses under SST namely:
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
Why now? Today there is a wealth of experience to tap into. In other words, the chance of success in implementing GST is high as there is much experience for Malaysia to draw upon them around the world in designing the system. Over the years, GST/VAT has been adopted as a main form of taxation. Currently, more than 160 countries have implemented GST/VAT.
3. What is the significance of GST?
GST is a better tax system. It is more transparent, efficient, effective, self policing and less bureaucratic. GST would eliminate double taxation under the current SST. Consumer will pay fair prices for most goods and services compared to SST.
For businesses, they are able to reduce their cost of doing business since they are able to claim GST incurred on their business inputs. For example, under the current taxation system, manufacturers are not allowed to claim service tax on telecommunication, accounting and legal services and sales tax on indirect inputs such as office equipment and furniture. These taxes are embedded into the price of the goods sold. Hence, the cost of doing business increases. Under the GST system, any GST incurred on acquisition is claimable and is not a cost to businesses.
As such, Malaysian exports will become more competitive in the global market as no GST is imposed on exported goods and services. This will strengthen our export sector which would contribute to the economic growth of the country.
1. Is it a new tax?
No, it is a tax to replace the current Sales Tax and Service Tax (SST).
2. Why does the Government want to implement GST? Why now?
Many countries have adopted GST/VAT because they are dissatisfied with their consumption tax structure. This dissatisfaction falls broadly into one and possibly all of the following categories:
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
In the case of Malaysia, the introduction of GST is part of the overall Government tax reform programme towards making the taxation system more efficient, effective, transparent, business friendly and capable of generating a stable source of revenue. GST is to replace the current consumption tax comprising of SST.
Based on the study conducted by the Ministry of Finance, GST can overcome the various inherent weaknesses under SST namely:
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
Why now? Today there is a wealth of experience to tap into. In other words, the chance of success in implementing GST is high as there is much experience for Malaysia to draw upon them around the world in designing the system. Over the years, GST/VAT has been adopted as a main form of taxation. Currently, more than 160 countries have implemented GST/VAT.
3. What is the significance of GST?
GST is a better tax system. It is more transparent, efficient, effective, self policing and less bureaucratic. GST would eliminate double taxation under the current SST. Consumer will pay fair prices for most goods and services compared to SST.
For businesses, they are able to reduce their cost of doing business since they are able to claim GST incurred on their business inputs. For example, under the current taxation system, manufacturers are not allowed to claim service tax on telecommunication, accounting and legal services and sales tax on indirect inputs such as office equipment and furniture. These taxes are embedded into the price of the goods sold. Hence, the cost of doing business increases. Under the GST system, any GST incurred on acquisition is claimable and is not a cost to businesses.
As such, Malaysian exports will become more competitive in the global market as no GST is imposed on exported goods and services. This will strengthen our export sector which would contribute to the economic growth of the country.
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