TAXATION 2
ASSIGNMENT 1

PREPARED BY:
MOHD HISYAM BIN RODIN
01-201106-00434

LECTURER:
MRS. DIANA

SALES AND SERVICE TAX

Objective
Service Tax is a form of indirect tax imposed on specified services called "taxable services". Service tax cannot be levied on any service which is not included in the list of taxable service. Sales tax is a single stage tax imposed at the import or manufacturing levels. In Malaysia, manufacturers of taxable goods are required to be licensed under the Sales Tax Act 1972..

Concept
Companies with a sales turnover of less than RM100,000 and companies with Licensed Manufacturing Warehouse(LMW) status are exempted from this licensing requirement . A service tax applies to certain prescribed goods and services in Malaysia including food, drinks and tobacco; provision of rooms for lodging and premises for meetings, conventions, and cultural and fashion shows; health services, and provision of accommodation and food by private hospitals.
The tax also applies to professional and consultancy services provided by accountants, advocates and solicitors, engineers, architect, surveyors (including valuers, assessors and real estate agents), advertising agencies, consultancy firms, management service provider, insurance companies, motor vehicle service and repair centres, telecommunication services companies, security and guard services agencies, recreational clubs, estate agents, parking space services operators and courier service firms.
Certain non-essential foodstuffs and building materials are taxed at 5%, general goods at 10%, liquor at 20% and cigarettes at 25%..

Exemptions
A companies with a sales turnover of less than RM100,000 have to apply for a certificate of exemption from licensing. Licensed manufacturers are taxed on their output while manufacturers that are not licensed or exempted from licensing need to pay tax on their inputs. To relieve small-scale manufacturers from paying sales tax upfront on their inputs, they can opt to be licensed under the Sales Tax Act 1972 in order to purchase tax-free inputs. With this, small-scale manufacturers can opt to pay sales tax only on their finished products. Sales tax is generally at 10%. However, raw materials and machinery for use in the manufacture of taxable goods are eligible for exemption from the tax, while inputs for selected non-taxable products are also exempted.
Certain primary commodities, basic foodstuffs, basic building materials, certain agricultural implements and heavy machinery for use in the construction industry are exempted. Certain tourism and sports goods, books, newspapers and reading materials are also exempted

GOOD AND SERVICE TAX(GST)

Development of GST in Asian country.
Indonesia, Thailand, Singapore, Philippines, Cambodia, Vietnam, Laos were an example of Asian country imply GST in their government. Last Updated : 15/2/2013 23:27 GST shall be levied and charged on the taxable supply of goods and services made in the course or furtherance of business in Malaysia by a taxable person. GST is also charged on the importation of goods and services. A taxable supply is a supply which is standard rated or zero rated. Exempt and out of scope supplies are not taxable supplies. GST is to be levied and charged on the value of the supply. GST can only be levied and charged if the business is registered under GST. A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold. Therefore, such businesses cannot charge and collect GST on the supply of goods and services made to their customers. Nevertheless, businesses can apply to be registered voluntarily. Almost all countries collect income tax, which is a percentage of what you earn as an individual. Another way the government gets revenue is by collecting tax from business operations, like sales tax and duties on items that are bought or sold. We need to pay tax so that the government can operate. GST is one method of collecting taxes which works better than others | |

Advantages and Disadvantages of the GST implementation in Singapore.
Advantages:
To the government: 1. It generates a stable and predictable tax income in both good and weak economic environment. 2. It is an efficient tax due to the comparatively lower cost of administration and collection. 3. It allows the Government to lower corporate and personal income taxes, which in turn encourages more foreign direct investment. This leads to overall economic growth.
To businesses and individuals: 1. Most large, established businesses are GST registered – getting your business GST registered is often a signal to customers that your business is an established business and has certain size. 2. GST is a fairer tax system. It taxes the self-employed and wage earners only when they spend their money. 3. GST taxes apply only on consumption. Savings and investment are not taxed. This will encourage people to save and invest in productive activities. 4. Cost of doing business is reduced, thereby contributing to lower prices. Businesses do not suffer a tax cost due to the multi-stage credit mechanism since the real taxpayer is the end-user.

Disadvantages: 1. The disadvantage of GST registration is the administrative burden that comes with discharging the duties and responsibilities of GST registration. 2. One must either study the intricacies of GST or pay an accountant to undertake this work which in some cases can be a reasonably high cost. 3. Being GST registered effectively increases your selling price by 7%. Your customers who are not GST registered would not be able to recover the GST you charge. So although your costs are reduced because you can recover GST, your customers might not be too pleased. 4. GST can be a burden to lower income groups, especially during times of high inflation when the 7% tax is paid on the increasing price of daily essentials.

Implication of GST implementation in Malaysia.

Due to small income tax collection base (1 million taxpayers), GST will be a strong boost to government revenues. If implemented correctly, it appears that the Malaysian GST will also act as a effective dragnet for tax evaders and illegal immigrants who pay no income tax. The payments made to BR1M recipients will offset most of the GST’s impact on the poor.
However will this GST cause a general feeling of unrest among the rakyat? Quite likely this will provide much ammunition for the political opposition. I also forsee be a spending binge in early 2015 before GST is implemented, and a retail slump until the 2015 Raya holidays. Companies that provide credit terms will have more cash flow problems due to the need to pay Customs before receiving payments. It will be more common practice to charge interest for late payment. The stock market will be more volatile, and shares in companies that produce discretionary products such as alcohol, cigarettes, candy will take a beating. IT and accountancy service shares will surge in value.
Lastly, the Singapore government rolled out GST with tail-winds as the economy was doing reasonably well. Let’s see if the Malaysian government has similar good fortune. If GST is rolled out when the economy is moving into recession, or the implementation is poor, there will definitely be unrest.

References

http://juristech.net/juristech/impact-malaysias-gst-implementation-comparing-singapore http://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guide http://ssm-syarikat.com/Service-tax-sales-tax.html
http://gst.customs.gov.my/en/gst/Pages/gst_un.aspx