Starting from 1st April 2015, 6% of Goods and Services Tax (GST) had implemented

in Malaysia effectively. Since GST has been implemented, it has become one of the most
popular topic to discuss among people. The implementation of GST had actually tabled at
Dewan Rakyat for the first reading in 2009, at the reason of depending on the tax of oil
income is not reliable anymore, but then it was delayed by critics. After then, it was
announced again by the Malaysian Ministry of Finance in the Budget 2010 and was planned
to implement during the third quarter of 2011, but it was delayed again until the 1 st April
2015. Now, the main purpose of implementing GST is to recover the deficit budget in
Malaysia and does not want Malaysias revenue keep relying to the oil revenue, it will
replaced the 10% sales tax and 6% services tax that already exist.
GST is also called as Value-added Tax (VAT) or General Sales Tax (GST) in other
countries. It is a form of consumption tax that added into every product or services when
consumers buy them. It was first invented by a French tax in 1950s, at the time, France and
Monaco had become the first to implement this new concept of consumption tax. Right after
France and Monaco that had implemented GST in 1954, which are both have the same
standard rate of 20%, reduced rate of 2.1%, 5.5% and 10% for certain product or services
now, Ivory Coast had also followed their step in 1960 with 18% of current rate now.
Currently, there were more than 160 countries that had implement GST or VAT. Malaysia is
not the first country to implement GST, and will not be the last to implement.
As mention before, GST is implemented to recover the deficit budget and will
replaced the existed sales tax. It is because that GST is more effective and transparent
compare than sales tax. Since there are few weaknesses of sales tax such as double taxing and
cascading tax, the present of GST is to overcome these weaknesses. Besides, every
transaction with GST only required to submit a simplified tax returns, it is to be easier for
administer to review. GST will be charged to every taxable products or services including
imports, but there is also product or services that exempt from GST such as agricultural
products, water for local users, essential foodstuff, etc. Businesses that had turnover more
than RM500,000 are forced to register to charge for GST before the end of 2014 or they will
get jail. The GST charge have to submit to government every quarter of year, businesses can
claim the tax credit through government.
Since the announced of the implementation of GST, people had voiced out their
opinion to GST. Nor Atiqah Mohd Zaini is an account executive at public relations agency,

she said that although she is oppose to GST, but logically GST really helps in increasing the
revenue of the country, she is able to accept it if this is not burdening the residents. A massage
therapist, Tan Lee Mei said that she is agreed to the implementation of GST but she felt that it
is too high to impose 6% of GST especially for the lower income people. As an example,
Malaysias neighbour, Singapores current GST rate is 7% which is 1% higher than Malaysia,
but their people were able to accept it as it started off with only 3% in 1993, and slowly
increase by 1% to 7%. Mohamed, who has a family to feed, point out that maybe there will
be a different in short term, but when it goes long term, people will have to tolerate with it.
There was also people who against it, Mark Lee and Pang Kian Chung expressed their
opinion on the internet, said that it does not solve the root cause which is the mismanagement
from government. Another internet user, Syed Putra Jamalullil felt that GST should only
capped at 2.5% as the middle income people actually get hurt the most.
Studies show that 64% which is majority of people is not happy and not supporting
the government to implement GST. About 72% of people worried that GST will increase the
goods and services prices in the future. 81% of people believed that although GST does not
implement into agriculture goods, the living costs will increase when GST is implemented.
People said that they are going to rearrange their consumption behaviour to face the problem
of high living cost that brings by GST. Most of the family also stated that they are going to
shop a lot as the prices of goods will definitely increase after the implementation of GST. As
overall, although most people are against toward the implementation of GST, they had no
choice but to accept the truth that GST will come into their life soon and they would have try
their best to face it and tolerate with it.
In this GST case, the government is expected to be the biggest winner. GST system
provide a better prevention of tax avoidance and tax erosion, the system is more easier and
the tax administration is more cheaper. Based on the government, businesses who act as a tax
collectors are not so much affected in with the GST. However, many businessmen complaint
they are actually affected much more than government said. Many businesses are forced to
buy the GST system since they are forced to register to charge GST, they also had to buy
machines to print out the receipt of charging GST to customers. One of the businessman who
owns a music education centre states that he had to buy the GST system, printer, laptop and
A4 papers in order to record all the transaction and print out the GST receipt to their students,
these had already cost him more than RM2000. An almost 80 years old businessman who

own a traditional Chinese medicine store, decided to closed his business as he dont even
know how to use GST system and all the new technologies.
Besides than businesses, the end consumers will be the biggest loser since almost
every products and services are fall under GST except for few that are exempted. Although
healthcare are listed in the GST exempted lists, but this is not include the private hospitals, it
had become a burden for those who are in the private hospitals. After the implementation of
GST, prices of mostly goods and services are expected to increase 1.8% and definitely, it will
decrease the purchasing power of consumers and consumers will tend to save more for the
future rather than consume. Although it is a good news that prices for electric products,
clothing and cars are expected to decrease as their 10% sales tax now had reduced to 6%
services, the problem is when purchasing power of people is much more lower than before, is
it really a good news for people to know that prices of television will drop while the prices of
Gardenia is going to increase?
There are also critics said that GST is going to hurt more to the middle income family.
Based on the data, only 1.8 million of people earn enough to pay their personal income tax,
which means that 14% from the workforces are able to pay income tax. But now, with GST,
the middle income family could not avoid to pay tax when buying daily suppliers. For higher
income family, they have the ability to pay for the GST, while lower income family have
subsidies and BR1M that provided by the government. Middle income family does not meet
the requirement of less income to apply for subsidies, and at the same time, they have no
additional income for them to afford to pay for GST. They are the one who suffer to pay for
the tax but did not get any subsidies from government. Moreover, the overall household debt
is now worth RM854.3 billion which equivalent to 86.8% from the GDP, the implementation
of GST will causes household to reduce their spending and this could cause a big impact to
our overall growth.
C = A + mpc (1-t) Y
C = Consumption
A = Autonomous Consumption
mpc = Marginal Propensity to Consume
t = Tax
Y = Income

Based on the formula above, although it seems good to replace 10% sales tax with 6%
of GST as it would increase disposable income, it does not work at the same way for both of
this tax. As an example, sales tax does not charged into neither fresh food nor manufactured
food, while GST does not charged into fresh food but it does charged into manufactured food.
Before GST, children below 7 years old are basically no need to pay any tax, but after GST,
only milk powder for children below 3 years old are zero-rated, milk powder for children 3
years old and above have to charge GST, it become a burden for parents as milk powder are
very expensive now.
It is very risky to implement GST at the period when inflation keep rising, decreasing
in oil price and devaluation of currency. As mention above, one of the reason that Malaysia
implement GST is because government does not want to be rely too much on oil tax. At the
period of the oil prices keep decreasing, government had to find another way to solve the
revenue problem which is to implement GST. However at the same time, devaluation of
currency also give a hard time to people as goods are getting more expensive. Choosing the
hard time to introduce GST will just giving more burden to the people. Although government
sees the Ringgit devaluation problem in a very optimism way, said that it would increase our
export and tourism in the country which can increase GDP, it is just because government only
sees from one aspect. From another aspects, the devaluation of Ringgit and implementation
of GST would also decrease the consumption that contributes the most to the GDP.
(Consumption + Investment + Government spending + Export - Import)
The implementation of GST have also create responsibilities to many sectors such as
businessman, companies, accounting and finance graduates, etc. In companies sectors, the
knowledge and expertise of GST have to spread out and to everyone that involved with it
such as companies employees. Training have to be arrange to top managers and every staff in
order to familiar with the operating of GST, this is to ensure that company can still operate as
usual even though with the new GST system. The tax authority also have to take their
responsibility to cooperate with companies in arranging training to the staff to ensure that
they fully understand with the operation of GST. They also have to be compassionate with
businessman and companies that make mistakes at the beginning of the GST implementation.
Besides, since businesses have to pay for the 6% GST before they could claim back
from government, their cash flow management have to ensure that there is a good level of
cash flow in operation otherwise they could be in the cash flow problem. Human resources

management also have to ensure that they need more experts who familiar with the operation
and the system of GST. They are taking the risk of the failure in the company operating
system if they fail to have at least an expert who can handle the new GST system perfectly.
Future accounting and finance graduates have to be prepare with the sufficient
knowledge of GST in order to promote themselves to their future bosses. They should also
have a deeper understanding of the sales tax and services tax before the implementation of
GST in order to understand more on the effect that brings by GST. As the world now have
become more advanced liberal, they are the one who should bring in the new knowledge and
expertise to the public.
As conclusion, I believed that the idea of implementing GST is good as Malaysia is
having a huge deficit in revenue and still owning a big amount of debts. From the experience
from the countries that had implemented GST or VAT long time ago, we could really see
good effect toward their economy and GDP. However, what Malaysias government had do
wrongly is they had choose the wrong time to implement GST when we are having Ringgit
devaluation and inflation. The percentage of GST when first introduced are also too high for
people to accept it, Malaysia should learned from other countries such as Singapore to
introduce their GST at the low percentage which is only 3%. It is more easier for people to
accept GST of 3% rather than 6% which is a quite high percentage. Is the implementation of
GST good or bad? No one can answer it with confident until we see the impact of it few years
later.

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