What will Happen Followed by the Zero-Rated of GST?

What will Happen Followed by the Zero-Rated of GST?

There are a lot of things going on since the GE14. One of the big news is the GST Zerorisation. On 16th May, Tan Sri Zeti Akhtar Aziz, the former governor of Bank Negara, who is a member of the Council of Eminent Persons stated to press that there will be no turning back on the proposed abolition of GST.

According to the election manifesto of the new federal government, the current Goods and Services Tax (GST) will be abolished and be replaced by the Sales and Services Tax (SST). The shifting between two distinct taxation systems has to be conducted carefully and that involves a lot of strategic planning and decision making. Nevertheless, all the decisions must also be approved in the Parliament before announced.

Therefore, to prepare the businesses before the changing of the taxation system, the government announced the GST Zerorisation to create a buffer zone before introducing the SST. In other words, we are welcoming a ‘tax holiday’ in Malaysia during this gap time.

The ‘Tax Holiday’

Since the GST will be reduced to 0% on the coming 1st of Junein fact, there are a lot of businesses, especially in the retail sector, already started to implement the deduction of 6% GST to boost their sales – and it probably will take two to three months before the SST is introduced, consumers are given an opportunity to enjoy buying goods at a reduced rate for these coming few months.

There were some netizens voiced out their worries which they thought businesses might increase the prices of goods to cover the taxes that they had already paid. However, we can rest assured that it won’t happened that way because the announcement by Ministry of Finance has stated clearly that all businesses must cooperate with the decision of zerorising the GST.

Many companies have started introducing offers to consumers to cash in on the GST-free rate even before the tax is rescinded.

While enjoying the ‘tax holiday’, as a responsible Malaysian, we should also study the differences between both systems and understand the possible impacts of the abolishment of GST.

Understanding the Differences Between GST and SST

SST is the taxation system that had been running in our country since the 1970s until the implemented of GST in 2015. It covered by 2 separate tax laws on a wide variety of goods and services at a single level, which includes the Sales Tax Act 1972, a single-stage tax charged typically at the manufacturer’s level and the Service Tax Act 1975, a single-stage tax charged at the consumer’s level except at tax-free zones. Prior to being replaced by GST in 2015, the sales tax was at 10% and service tax was at 6%.

GST, on the other hand, is a tax on most products and services for domestic consumption at every level in the production process. In our country, GST can be claimed as input tax only for companies with revenue above RM500k. Below is a chart shared by MyPF.my that explains the mechanism of GST.

Why Abolish the GST?

The GST is said to be a more transparent and unbiased taxation system. However, since the implementation of GST in April 2015, it has received a lot of criticism from the public. The main reason is the GST has caused hardship on the people with the cost of goods going up. For businesses, the complicated multi-stage taxation system and strict rules have resulted to a high implementation cost that burdened them. Moreover, many business owners said the claim back on input tax is difficult and requires RM500k in sales before being claimable.

In short, prices of goods raised, people are facing hard times, Pakatan Harapan wants to create higher purchasing power in the hands of the people. Therefore, GST has to be removed.

Will the Abolishment / Zero-rated of GST Affect the Government?

Of course, the GST zerorisation will cause the government tax revenue to drop. However, we are also expecting offers and price-drops in goods during the ‘tax holiday’ period, and it will definitely increase the buying power of the people, especially the lower and middle-income groups (which is the majority of the people). Hence, the national economy will be stimulated.

In a statement to press by Tun Daim Zainuddin, chairman of the Council of Eminent Persons, he also pointed out that the country did not have a GST system previously, and there was no finance problem. He claimed that the real problem is corruption. So, as long as the new government maintains its uncorrupt, the reducing tax revenue won’t bring bad impact towards the country.

Will the Zero-rated of GST Affect the Businesses?

In a short period of time, businesses might need to absorb some of the costs because they have paid for the GST on some products before June but they are required to deduct the GST from the price tags starting this June.

However, according to many businesses, the GST zerorisation is actually bringing down business cost and also improving the ease of doing business. Especially for those who have more than one categories of products, the computation and book-keeping for different categories of GST are complicated and require a lot of technical support, which is the reason that causes the cost of business to increase. By zerorising and eventually abolishing the GST, most of the businesses will not need to suffer from the complicated implementation and filing of GST anymore.

What is the Impact of GST Zerorisation to Consumers?

As we are having a ‘tax holiday’ soon, there will be a lot of sales and promotions going on. So, the real problem that you’re going to face is “I can’t stop shopping!

Knowing that spending more at this part of time can actually help the country, isn’t this the best excuse reason to splurge?

Happy tax holiday!

By | 2018-05-30T09:40:58+00:00 May 28th, 2018|0 Comments

Leave A Comment

Page Reader Press Enter to Read Page Content Out Loud Press Enter to Pause or Restart Reading Page Content Out Loud Press Enter to Stop Reading Page Content Out Loud Screen Reader Support