In a nut shell, GST works like this:
Supplier A sold his products to supplier B for RM100 and assuming 3% GST applies, he will bill supplier B RM103.
Supplier A sold his products to supplier B for RM100 and assuming 3% GST applies, he will bill supplier B RM103.
Supplier B has a policy to earn 9% on his selling price hence the cost to consumers will be RM110 (RM10 margin on RM110 selling price gives you 9% margin) plus 3% GST i.e. RM3.30 will be added onto the bill, making it RM113.30.
Supplier A collects RM3 from B and pays to the IRB within a specific period, like 2 months from date of invoice while B would pay IRB RM3.30 and claim back RM3.00. The end result is IRB getting RM3.30, 3% on the ultimate selling price of RM110. Consumers pay the whole RM3.30.
The above is a very simple illustration. In real life, goods and services pass through many parties before arriving at hands of ultimate consumers.
Presently the Malaysian tax structure provide that people earning below RM3,000 a month can be exempted from tax owing to the series of relief and scale tax rates.
With GST, everybody would be taxed regardless of income level, as long as he or she spends money.
For more information on the implications of GST, check out this page.
This is what our "brillant" PM has to say about the GST!
It’s not going to be an abrupt introduction,” Najib said, adding that if the GST materialised, the rate would not burden the poor or middle-class Malaysians.At the moment, people with salary below RM3,000 per month can be exempted from income tax. Now a poor person in Malaysia should be earning less than RM3,000 and with GST, that person who was not paying income tax would now instead be required to pay GST.
Now how would that "not burden the poor"?
“And, it would not lead to inflation,” he added.
He has to explain how he can guarantee that there will be no inflation as a result of GST. Inflation is defined as generally increases in price of goods and services. Now if something that cost RM100 now becomes, says after GST at 5% , RM105, to me as the ultimate payer of GST, there is a price increase.
He has to explain how he can guarantee that there will be no inflation as a result of GST. Inflation is defined as generally increases in price of goods and services. Now if something that cost RM100 now becomes, says after GST at 5% , RM105, to me as the ultimate payer of GST, there is a price increase.
This is what our brilliant Second Finance Minister has to say!
If we can secure a sustainable revenue, we can get a good budget," he said.
Husni said the government was expected to earn 1.0 billion ringgit (294 million dollars) in the first year of the GST implementation.
If we can secure a sustainable revenue, we can get a good budget," he said.Husni said the government was expected to earn 1.0 billion ringgit (294 million dollars) in the first year of the GST implementation.
MAYBE if the govt wants to secure a sustainable source of revenue, they should consider fixing the stupid expenditure in the auditors general's report first!
The new Istana Negara cost RM1.1billion!
And the GST is expected to earn the govt a revenue of RM1billion!
Draw your own conclusion lah!
Is the government attempting to shift the taxes from the rich to the ordinary people??
First the govt, in this year's budget gave a 1% tax break for those who earn RM100,000.
Who earns RM100,000 a year but the rich!
Well at least the pirated DVD's, massage palour, and health spa (prostitution) will not increase their prices (since they don't have to pay GST)!
For futher reading check out great articles here
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Example
Consider the manufacture and sale of any item, which in this case we will call a widget.
[edit] Without any tax
A widget manufacturer spends £1.00 on raw materials and uses them to make a widget.
The widget is sold wholesale to a widget retailer for £1.20, leaving a profit of £0.20.
The widget retailer then sells the widget to a widget consumer for £1.50, making a profit of £0.30.
[edit] With a North American (Canadian provincial and U.S. state) sales tax
With a 10% sales tax:
The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.15, leaving the profit of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not lost anything directly to the tax, and retailers have the extra paperwork to do so that they correctly pass on to the government the sales tax they collect. Suppliers and manufacturers have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers.
[edit] With a value added tax
With a 10% VAT:
The manufacturer pays $1.10 ($1 + $1x10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 ($1.20 + $1.20x10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the profit of $0.30 (1.65-1.32-.03).
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The businesses have not lost anything directly to the tax. They do not need to request certifications from purchasers who are not end users, but they do have the extra accounting to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).
Note that in each case the VAT paid is equal to 10% of the profit, or 'value added'.
The advantage of the VAT system over the sales tax system is that businesses cannot hide consumption (such as wasted materials) by certifying it is not a consumer.
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