Premium Essay

Gst: a New Tax Reform in Malaysia

In: Business and Management

Submitted By justinwoo
Words 3535
Pages 15
International Journal of Economics Business and Management Studies - IJEBMS ISSN: 2226-4809; EISSN: 2304- 6945 Vol. 2, No.1 (January, 2013) 12-19 Indexing and Abstracting: Ulrich's - Global Serials Directory

Goods and Services Tax (GST): A New Tax Reform in Malaysia
Nor Hafizah Abdul Mansor Faculty of Accountancy Universiti Teknologi MARA (UiTM), Malaysia Email: norha058@johor.uitm.edu.my Azleen Ilias College of Business and Accounting, Universiti Tenaga Nasional (UNITEN), Malaysia Email: Azleens@uniten.edu.my Abstract The Goods and Services Tax (GST) is becoming one of the most prominent topics in Malaysia. The announcement by the Malaysian Ministry of Finance (MOF) in the Budget 2010 on the implementation of GST had created various reactions from practitioners, academicians, general public and most important businesses. GST is one of the tools that are proposed by the Government to reduce continuous deficit budget in Malaysia. This paper discusses the GST as a new tax reform in Malaysia, and covers several issues in order to enhance the understanding and readiness among Malaysian in adopting GST. Keywords: Tax reform; GST; budget deficit. 1. Introduction The introduction of Goods and Services Tax (GST) was first announced in the Budget 2005 in order to replace the existing sales and services tax structure in Malaysia. This new tax reform is projected to be implemented in January 2007. However, the Government has announced on 22 February 2006 that the implementation would be postponed to a later date. Recently in Budget 2010 the Government is currently at the final stage of completing the study on the implementation of GST, particularly to identify the social impact of GST on the rakyat. The implementation of GST will witness that, not only on manufacturing and services sector would be affected, but also include other sectors such as education, health,...

Similar Documents

Premium Essay

Introduction to Gst

...Introduction The idea of introducing a flat consumption based Goods and Services Tax (GST) in Malaysia has been floated since 1989. It now seems as though this may become a reality in the 2014 Budget, with implementation beginning within 18 to 24 months at an initial rate of 4 % on the supply chain. The plan to overhaul the tax system has begun to gain momentum as the government deals with an increasingly weak economic outlook, combined with global uncertainty. While not at the emergency levels of many advanced Western European economies, Malaysia has not run a structural budget surplus since the Asian Financial Crisis hit in 1997. Federal government debt as a percentage of Gross Domestic Product (GDP) currently sits at 55.4 %.1 For the time being, this is manageable, but it is the government’s ability to reign this spending in, as well as lack of budgetary reform that has led ratings agency Fitch to downgrade Malaysia’s credit outlook to negative this year. The government’s recent 20 sen cut to the fuel subsidy and increasing speculation of a GST framework to be included in the upcoming budget can be seen as evidence that they are trying to remedy both structural and cyclical economic challenges....

Words: 6974 - Pages: 28

Premium Essay

Public Readiness for Gst Implementation in Malaysia 2015

...Hence, GST is not a new exercise of tax; with more than 140 countries worldwide having had implemented GST, and this is includesd many developed and developing countries e.g. US, UK, France, Germany, Brazil, Argentina, Singapore, Cambodia and more. The proposed GST rate is at 6% initially and it is a broad based consumption tax to replace the current sales tax of 10% and service tax of 6%. In Malaysia, the introduction of GST is aimed at reducing the nation’s growing budget deficit and it is...

Words: 2638 - Pages: 11

Premium Essay

The Perception of Taxpayers Towards Gst in Malaysia

...The GST plan was first raised in 1988 but at the time it was considered unnecessary because the sales tax and services tax was effectively working. Therefore the plan was put on hold until it is deemed appropriate to be implemented. The GST was also included in the government policy such as in the Malaysian New Economy Model (NEM). In the NEM recommendation, GST would act as an important component in reforming the source and distribution of revenue in Malaysia because of it swider tax base....

Words: 15209 - Pages: 61

Premium Essay

Gst in Malaysia

...Abstract The upcoming commencement of GST, the Goods and Services Tax, in Malaysia has been critically received by citizens. This study has been conducted to gauge the level of awareness and approval of GST among IIUM students. The general outlook on GST is negative, stemming from a lack of awareness as to what GST truly is and the taxpayers mindsets (Abdul Mansor & Ilias, 2013). Questionnaires were distributed to random IIUM students aimed at getting their awareness on GST and its implementation. The findings indicate that IIUM students are aware of GST and its imminent implementation and conflicting views on whether or not they approve of its implementation. Perhaps with a little scrutiny and education it might be possible to increase awareness on GST, and may change people perceptions and reception of it, be it positive or negative. 1.0 Introduction In general, Goods and Services Tax (GST) is a consumption tax which is imposed on the sale of goods and services, and it is divided into two categories indirect taxes and direct taxes and is administered by the Royal Malaysian Custom (RMC). The Malaysian government has announced that the new system which will be implemented starting 1st April 2015 at the rate of 6% (Robinson, 2014). The GST (goods and services tax) system will be replacing the present SST (sales and services tax)....

Words: 3240 - Pages: 13

Premium Essay

Business Tax

...Question 2 The possible implication of that tax system for the Malaysian economy, If implemented. The Malaysian government has to make procedure decisions on how to implement the GST. The most necessary decision about VAT is if it should be imposed as a expenditure, gross-product or income-type tax. Malaysia proposed a consumption-based GST. The use of invoices for GST provides more simplicity on how the tax is imposed. For VAT imposed as an income-type the accounting representation would be more suitable. In that case it would be based on the economic records of the company. The main advantage of a VAT is that it is a broad based system. Typically government and non-profit enterprises are excluded from the tax base. Further an important policy decision is to determine the place where GST is levy. For International Trade the place where the GST is levied is a vital matter. On the one hand the GST can be levied on the location of assembly (the origin principle) on the other it can be based on the location of the final consumption (the destination principle).The origin principle VAT is levied on value added within the state for all goods and services despite of whether they are sold within the state or export out of the state. It excludes value added personified in the goods and services that originate outside the state. The most regular is the use of the goal principle....

Words: 1607 - Pages: 7

Premium Essay

Sme Towards Implementation of Gst

...This feature, however, comes with greater administrative and compliance costs. 1.2 Problem Statement The introduction of GST in Malaysia has called for many arguments from various parties including academics, professionals and the citizens (the potential GST payers) on how GST affects the operating cost of business. The government tried to convince Malaysians that the GST will not burden them and various measures are been taken by the government to control the increase in...

Words: 5991 - Pages: 24

Premium Essay

Literature Review

...Literature Review 1.1 Readiness, Perception and Awareness of people towards GST. The literature on the GST is extremely wide . The are many areas that can be focus on basically while doing my research . The most highlight areas on GST is on the public reaction towards GST in Malaysia before the implementation which can known their readiness , perception and awareness on GST. According to ( Mohd Rizal Palil ,2011) he has done a research in Malaysia on the impact of Good and Service Tax towards Middle Income Earners. The author has done survey towards people all around Kuala Lumpur through questionnaire. Based on the finding of his research he reveals that most of the employees does not support the government decision for the implementation of GST and also they strongly does not accept the fact that GST will be implemented in the nearest future. At the same time they strongly does not support the implementation. Based on (K. Saira ,2010) he has done a research on the awareness of the people towards GST and his finding indicates that people are not aware that GST will be charge on Goods and Services. The researcher conclude that people are not aware of GST as soon its going to be control in their life. Beside that they are not aware that it will impact on the economy very well. (K....

Words: 5096 - Pages: 21

Premium Essay

Operation Management

...Implementing Goods and Services Tax in Malaysia Lim Kim-Hwa Penang Institute & University of Cambridge limkimhwa@penanginstitute.org Ooi Pei Qi Penang Institute peiqi.ooi@penanginstitute.org 8 October 2013 Abstract External economic factors and Malaysia’s domestic fiscal position dictate that the Goods and Services Tax (GST) is likely to be introduced in the upcoming Budget 2014. In this paper, we: 1) assess if GST is a progressive or regressive tax; 2) study the impact of GST on Malaysian households; 3) estimate the total GST raised from households in perfect condition vs. practical circumstance; 4) estimate the expected inflation spike based on the Consumer Price Index; and 5) discuss the wider implications of implementing GST. Despite setting essential items like basic food, public transportation, education and healthcare as exempt or zero rated items, we show that GST is a regressive tax. Using 7% as the standard GST rate, the average household is expected to pay 2.93% of monthly income as GST (RM 104 per month in July 2013 values). Households will pay higher percentage of their income as GST if they are: middle and low income groups (with those earning around RM 2,500 per month paying 3.07%), engaged as technicians, clerical and services workers, farmers and fishermen, in single person household, in young households (less than 24 years old), Bumiputera-led households and households residing in Peninsular Malaysia....

Words: 14521 - Pages: 59

Premium Essay

Malaysia Goods and Services Tax

...Introduction On 10th October 2014, Dato’ Sri Najib Tun Razak, a Prime and Finance Minister, unveiled Budget 2015 addressing key issues on promoting fiscal sustainability and easing the transition to GST for business and consumers, while placing the nation on a firmer growth trajectory towards Vision 2020. Part 1 The three key issues concerning the individuals and sole-proprietor business have been introduced in 2015 budget. The first issue is about individual tax. The first change is that the income tax rate is reduced by 1 to 3% for resident individuals depending on different levels of chargeable income since Year of Assessment (YA) 2015 (KPMG, 2014). This results in that tax payers with family and income of Rm4,000 per month will not have tax liability....

Words: 2824 - Pages: 12

Premium Essay

Case Study

...Impact of GST on sub regions of Malaysia 24 2.2.1 How GST improve the standard of living 29 2.3. The implementation of GST in other ASEAN Countries 303. Implication Of Implementing GST On Economy...

Words: 12413 - Pages: 50

Premium Essay

Implementation of Gst in Malaysia

...(i) There were several changes in income tax rates and policies concerning individuals and sole proprietor businesses that were proposed in the Budget 2014. The three significant changes in tax policies are listed below. Review of Individual Income Tax In consideration of the implementation of the Goods and Services Tax (GST) which takes effect on 1stApril 2015, the government had proposed several changes to reduce individual income tax rates with effect from Year of Assessment (YA) 2015. The proposed changes are: I. Income tax rates for resident individuals is to be reduced by 1% to 3% II. Income tax rates for non-resident individuals is to be reduced by 1% from 26% to 25% III. Current maximum tax rate at 26% to be reduced to 24% IV. Two new chargeable income bands be added above the existing highest income band exceeding RM 100,000, with RM100, 001-RM250, 000 as the second highest band and RM250, 001-RM400, 000 as the highest band. V. Chargeable income subjected to the maximum rate will be increased from exceeding RM100,000 to RM400,000. Such proposed changes will bring about savings across the band for all taxpayers and so increase the disposable income for all individuals. This measure is necessary as the implementation of GST will increase the cost of living which will impact the lower income bracket the most....

Words: 3421 - Pages: 14

Premium Essay

Gst Comparison Between Malaysia, Singapore and India

...In Malaysia the GST have been establish in a very clear manner, for example all goods and services made in Malaysia including imports supply will imposed GST. Goods and services which are categorized under zero rated supply and exempted supply will not imposed GST. This is considering as a systematic taxation system which will benefits the government and the citizens. GST ASSIGNMENT Page 1 OVERVIEW Moreover GST also eliminate or reduce all the weakness in the sales and service tax. Below...

Words: 15950 - Pages: 64

Premium Essay

Tax Analysis for Gst

...CONTENT No.2 Title Page 13fewfqefqefqewf Introduction 1fqefqwefqeqef 2eqfewfwefefqefqefeq Findings – Tax Advisors 2wfqwefqewfqwefqefqw 3efqwefqewfwqefqwefqwef Findings – Individual 7efqwefwefwefwefweqfqwefq 4wefqwefqwefqwefqefq References 18wefqewfqewfqwefqwefqwefqwe fqwefqewfq 5wefqwefqwefqwefqwefqwefqwef Appendix 19qwefqwefqefqefqwefefwefweqfwefwqefwef 1. INTRODUCTION The Goods and Services Tax (GST) can be defined as a value-added tax that is levied on most goods and services sold for domestic consumption. The tax is implemented to provide revenue for the federal government. In Malaysia, the GST was scheduled to be implemented during the third quarter of 2011 but the implementation was delayed until the 1 st of April 2015. The Goods and Services Tax was tabled for the first time at the ‘Dewan Rakyat’ on 16 th of December 2009. Since there is a high number of criticism, it was delayed. On 25 th of October 2013, during the government’s reading of the National Budget 2014, the Malaysian Prime Minister, Dato’ Sri Najib Razak announced a GST tax of 6% will be implemented starting on the 1 st of April 2015 to replace the Sales and the Services tax. The implementation of the GST is a part of the government’s tax reform program to enhance the capability, effectiveness and transparency of tax administration and management....

Words: 4702 - Pages: 19

Premium Essay

Business Portfolio

...Portfolio: Business and financial information Article 1 Source: News.com.au 20 May 2012 The name of the article is “Pressure on to secure staff”. It relates to Australia’s private owners struggling to retain and attract quality staff – but are also pulling back from strategies that would allow them to do so. PwC’s winter 2012 Private Business Barometer finds employment is a major challenge for private firms. The report shows about 39 per cent of businesses intend to pay bonuses, down from 50 per cent in March 2011, while fewer businesses intend to offer working hours or competitive salaries (both down from 41 per cent to 24 per cent), working-from-home conditions (19 per cent to 13 per cent) and lifestyle-based leave (16 per cent to 6 per cent). PwC partner Michael Browne says firms have cut bonuses and other recruitment strategies in response to more uncertain economic times. By not adequately investing now businesses could face problems retaining staff in the future. This can affect their profitability, and also expectations, objectives and needs. “Businesses are looking to cut costs, so you have this trade-off with staffing strategies” Michael Browne says. Businesses can improve their retention of valued staff by planning to: * Ensure staff remain engaged in their roles * Promote a healthy work/life balance approach * Have regular career conversations with staff These strategies would be relevant to the development of plans to......

Words: 4387 - Pages: 18

Premium Essay

Malaysia's Issues

...IMF Country Report No. 15/58 MALAYSIA March 2015 2014 ARTICLE IV CONSULTATION—STAFF REPORT; PRESS RELEASE; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MALAYSIA Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2014 Article IV consultation with Malaysia, the following documents have been released and are included in this package:  The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on February 13, 2015, following discussions that ended on November 24, 2014, with the officials of Malaysia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 23, 2015.  An Informational Annex prepared by the IMF.  A Press Release summarizing the views of the Executive Board as expressed during its February 13, 2015 consideration of the staff report that concluded the Article IV consultation with Malaysia.  A Statement by the Executive Director for Malaysia. The document listed below has been or will be separately released. Selected Issues Paper The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information....

Words: 28686 - Pages: 115