Huge impact caused by GST

Kwong Wah Daily, Editorial, Oct 15, 2014

The government has released a long list of goods and services to be exempted from Goods and Services Tax (GST) or zero-rated tax from GST. The list has been gazetted.

The unusual long list of goods reflects the good intention of the government to extend its social welfare net to avoid inflation due to implementation of GST on 1 April next year.

The government has also said that the GST is a more transparent and effective tax system. Once GST is implemented, it helps to increase the country’s revenue. Prime Minister Najib announced in Budget 2015 that the GST is estimated to bring RM23.2 billion of revenue for the government.

Despite the government stresses that GST would not increase inflation rate, all sectors are adopting a wait-and-see approach. Many sectors are planning to adjust its price. Even more surprising are private institutions of higher learning and Chinese independent schools predicted to raise tuition fees.

Generally, GST covers more than the existing 10% sales and services tax. The sale taxes used to be paid by manufacturers. Hence while the percentage of GST and sale tax varies, but the impact is profound. Logically speaking, goods and services should be cheaper when GST is implemented. In actual fact or at least impression wise, inflation would be more severe.

The government expands the scope of products to be GST exempted or zero-rated to reduce pressure of inflation. Zero-rated tax products and services mean that manufacturers, wholesalers and retailers are able to claim the tax from the government while consumers are not required to pay the tax. Consumers are also exempted from paying tax in items declared as exemption from GST while retailers are unable to seek refund of the tax from the government.

Some analysts are of the view that as the list of goods and services identified as GST exempted or zero-rated is long, cases of abuse and exploitation may occur. The list is complicated and overlapped each other. It is hard for people to understand the intention of government.

We believe the intention to implement a system is good. As citizens we are obliged to pay tax and assist the government to have an effective operation for the government to be able to assist those in need of help.

However, when implementing a new policy especially tax system when it involves all people, the government should be ready to tackle doubts and worry related to GST. This prevents prior to implementation of GST, various issues crop up and sharp rise on inflation. If a new policy were to face various attacks initial stage, more resources would have to be spent to rectify.

Original Source: 消费税冲击大