April 15, 2011

As we all know, a new tax system will be implemented soon which is the goods and services tax (GST). The latter is rumored that it would take place in mid 2011.

However, we still believe that most Malaysians are still confused about the GST. Let’s take a shot on some basic knowledge of GST Malaysia.

What is GST?

It is a tax that the buyer pays instead of the seller. Consumers still need to pay income tax as GST and income tax is totally different.

It is a consumption tax charged on imports and also value added to goods and services provided by a business to the end user.

What is Value added?

It is a mark-up price.

Selling price = Cost of materials + Profit charged to customers

How much is the GST?

It will be at 4%, and it is set by the Finance Minister.

What is the difference between GST and Sales Tax?

GST is a multi stage tax while sales tax is a one go tax. With GST, you won’t have cascading effect meaning you won’t need to pay any taxes which are not relevant.

What are the advantages of GST?

More efficient with more tax collected. The rate will be lower due to its broad base. The tax will be collected from the very first transaction to the consumer. This is how it’s known as broad base.

Are you eligible to charge GST?

One year business which amounts to RM 500k must register to charge GST. Business which is lesser then RM500k can volunteer to charge GST and claim input tax credit.

GST on imports?

Imported goods will be taxed at the time of importation

Will there be GST on domestic products?

Yes. GST will be collected within one month for businesses supplying goods and services. Period taxable will be three or six months depending on the classification of the business by the GST authorities.

Not all goods and services will be charge GST. There is 3 categories for GST, Taxable, zero rated and exempt.

Taxable Goods and Services

Consumers will be charged on 4%. If a business is registered to charge GST, the rate will be the same on the sale of the taxable goods and services and pay GST on its purchases.

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