...towards Implementation of GST in Kuala Lumpur and Johor Bahru CHAPTER ONE – INTRODUCTION 1.1 Background of the Study The production of a good or service, in general, goes through several stages before the final product or service reaches the consumer. To illustrate, if the production and distribution process is divided into three basic stages of manufacturing, wholesaling and retailing, value is added at each stage through further processing, packing or other improvements before it reaches the consumer via the retailer. The GST is a tax on the value added to the output or service at each stage of the process. In its generic form, the GST is a value-added tax (VAT). These terms are used interchangeably in this note. A multi-stage tax like the GST protects tax collections through two built-in features. First, the multi-point collection and invoice trail minimizes tax avoidance and tax evasion. This is because the need to issue and obtain invoices to claim tax deductions for taxes imbedded in inputs from a previous stage of the production chain fosters greater compliance. Second, the GST is better able to protect revenue from tax evasion by retailers as compared to a single-stage sales tax imposed solely at the retail sales tax (RST). This feature, however, comes with greater administrative and compliance costs. 1.2 Problem Statement The introduction of GST in Malaysia has called...
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...Services Tax in Malaysia Lim Kim-Hwa Penang Institute & University of Cambridge limkimhwa@penanginstitute.org Ooi Pei Qi Penang Institute peiqi.ooi@penanginstitute.org 8 October 2013 Abstract External economic factors and Malaysia’s domestic fiscal position dictate that the Goods and Services Tax (GST) is likely to be introduced in the upcoming Budget 2014. In this paper, we: 1) assess if GST is a progressive or regressive tax; 2) study the impact of GST on Malaysian households; 3) estimate the total GST raised from households in perfect condition vs. practical circumstance; 4) estimate the expected inflation spike based on the Consumer Price Index; and 5) discuss the wider implications of implementing GST. Despite setting essential items like basic food, public transportation, education and healthcare as exempt or zero rated items, we show that GST is a regressive tax. Using 7% as the standard GST rate, the average household is expected to pay 2.93% of monthly income as GST (RM 104 per month in July 2013 values). Households will pay higher percentage of their income as GST if they are: middle and low income groups (with those earning around RM 2,500 per month paying 3.07%), engaged as technicians, clerical and services workers, farmers and fishermen, in single person household, in young households (less than 24 years old), Bumiputera-led households and households residing in Peninsular Malaysia. We find that it is not possible to make GST a progressive...
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...What is GST? The Goods and service tax is an initiative towards a reform in which this tax will replace all the indirect taxes in the Centre as well as the State, which can be levied in case of a sale being made or a service being provided. It is especially necessary in the current scenario, due to the degrading effects of the present tax system of CENVAT and State Vat system and the other complexities that prevail in the tax system of India. Some of the taxes that will be replaced under the central taxes are Service Tax, Surcharges, Central Excise Duty, Customs Duties and other Excise Duties. Some of the taxes that will be replaced under the state taxes are Luxury Tax, Entertainment Taxes, Tax on gambling and betting, Lottery Taxes, surcharges etc., as long as they are related to entry tax and the supply of goods and services. Due to reasons, which are social, environment related as well as those related to import dependence, certain products like high-speed diesel, alcohol (human consumption) is not included. Also, the direct taxes will be exempted from the GST, including capital gains, corporate and income tax. To better understand GST, consider the following: There exists a manufacturer, retailer and dealer (wholesaler). Goods and Service Tax is 10%. Now assume that the manufacturer buys the raw materials worth Rs 100 for Rs 140. Therefore, the total GST he will pay is Rs 4 by getting a tax credit of Rs 10 on the raw materials he had purchased. Now, the...
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...Implementation of Goods and Services Tax : Destructive Effects Outweigh Benefits The issue of whether the government should implement Goods and Services Tax (GST) has been a hot debate in Hong Kong. The government stress that the tax will help broaden the tax base and secure the sustainability of tax revenue (Mak, 2006). They have also cited some examples from countries all over the world which have already imposed GST such as most of the Organization for Economic Cooperation and Development (OECD) countries and Pacific Asian countries (Yu, 2002). In spite of these, after considering the social context and environmental factors, the tax should not be imposed in Hong Kong since it will cause social discontent, hurt the economy and have low cost-effectiveness. First, social discontent will arise as a result of the implementation of GST. The GST is renowned for its regressivity, which is attributed to a widening effect on income disparity (Kato, 2003). Income disparity, which can be measured by Gini Coefficient, is an important social issue in modern cities (Callig, 2007). High degree of income gap is a serious socioeconomic problem, which will eventually lead to social discontent as the underprivileged cannot get their deserved treatment in society and may become highly unsatisfied. In extreme cases, social upheaval will break out. Currently Hong Kong is a place where Gini Coefficient measured in 2006 stood a record high of 0.533 (Economic Analysis Division, 2007). When compared...
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... Pages | 1. Introduction to GST 4 1.1. Background Of Study 4 1.2 What is GST 6 1.3 Why is GST implemented 8 1.4 Difference between GST and SST 9 1.5 General operations of GST 10 1.5.1 Goods and Services Tax (Zero-rated supply) Order 2014 11 1.5.2 Goods and Services Tax (Exempt supply) Order 2014 132. Content 14 2.1 Effect of implementation of Goods Services Taxes (GST) in Malaysia 14 2.1.1 GST are regressive tax or progressive tax? 14 2.1.2 Effect of implementation of GST on inflation based on CPI 16 2.1.3 Effect of implementation of GST on the household income 19 2.2. Impact of GST on sub regions of Malaysia ...
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... No. 11; 2013 ISSN 1911-2017 E-ISSN 1911-2025 Published by Canadian Center of Science and Education Elements of Compliance Costs: Lesson from Malaysian Companies towards Goods and Services Tax (GST) Mohd Rizal Palil1, Rosiati Ramli1, Ahmad Fariq Mustapha1 & Norul Syuhada Abu Hassan1 1 School of Accounting, University Kebangsaan Malaysia, Malaysia Correspondence: Mohd Rizal Palil, School of Accounting, Faculty of Economics and Management, University Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia. E-mail: mr_palil@ukm.my Received: May 6, 2013 Accepted: June 20, 2013 Online Published: August 30, 2013 doi:10.5539/ass.v9n11p135 Abstract URL: http://dx.doi.org/10.5539/ass.v9n11p135 Various parties including academics, professionals and the society (the potential GST payers) are arguing about the introduction of GST in Malaysia. Goods and Services Tax (GST) or Value Added Tax (VAT) is a consumption tax imposed on the sale of goods and services. The Malaysian government introduce this potential tax mechanism, in order to increase the existing tax bracket and replacing the long-implemented service and sales taxes. With the introduction of GST, the Malaysian government felt it would provide them with the prospect to reduce the rates of individual and corporate income tax. However, do all companies particularly small and medium enterprises (Companies) ready to adopt the systems efficiently? If they could adopt the system, how much their compliance costs involved...
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...of that tax system for the Malaysian economy, If implemented. The Malaysian government has to make procedure decisions on how to implement the GST. The most necessary decision about VAT is if it should be imposed as a expenditure, gross-product or income-type tax. Malaysia proposed a consumption-based GST. The use of invoices for GST provides more simplicity on how the tax is imposed. For VAT imposed as an income-type the accounting representation would be more suitable. In that case it would be based on the economic records of the company. The main advantage of a VAT is that it is a broad based system. Typically government and non-profit enterprises are excluded from the tax base. Further an important policy decision is to determine the place where GST is levy. For International Trade the place where the GST is levied is a vital matter. On the one hand the GST can be levied on the location of assembly (the origin principle) on the other it can be based on the location of the final consumption (the destination principle).The origin principle VAT is levied on value added within the state for all goods and services despite of whether they are sold within the state or export out of the state. It excludes value added personified in the goods and services that originate outside the state. The most regular is the use of the goal principle. Our analysis thus far has focused on evaluate if GST is a regressive or progressive tax and the corrective actions, the impact of GST on different...
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...Assignment on LR Process (10 Marks) 1. Categorizing your papers This should be a list of papers that have shaped your thinking so far. You may wish to highlight those that are ‘core’ and those that are more ‘peripheral’ [recognising that what is deemed core and periphery may change over time]. State a list of 15 papers related to your work. |Core papers |Peripheral papers | | | | | | | | | | | | | | | | On what criteria have you decided that a paper is core/periphery. Core papers are: • Texts that acknowledge and discuss the problem statements of your research and discuss the reality of the related situation. • Texts that reflect on the link between areas of focus in research • Texts that discuss...
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...improvements, implement quality control procedures and plan future strategies. The information required to manage the organisations finances are costings, operational, asset, credit analysis, GST transactions, inventory management, invoices and accounts. Managers and supervisors are responsible and should have a clear understanding of the businesses financial systems. Q2. Both systems operate the same. The systems show how well or poorly the financial management process is operating and the relationship between financial management and operations efficiency. Q3. Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. GST is levied on most transactions in the production process, but is refunded to all parties in the chain of production other than the final consumer. You must register for GST if you run a business or enterprise and your GST turnover is $75,000 or more ($150,000 or more for non-profit organisations). You only register once for GST, even if you operate more than one business. You must register within 21 days of reaching the threshold. You may choose to register if your GST turnover is below the threshold. Division 9 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) stipulates that GST is applicable to a supply of goods, services and transactions related to real property, obligations or rights. Q4. An audit is an accounting procedure where financial records of...
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...of this paper is to argue the need for tax reforms specifically aimed at addressing global issues in an increasingly interconnected world where tax laws are not designed for the digital age. It highlights the issues faced by countries due to ‘Base Erosion Profit Shifting ‘. The emphasis is mainly on two taxes, namely, ‘Diverted Profit Tax’ and ‘Digital Goods and Service Tax’, which are recently mentioned in the Australian Budget 2015. Organisation for Economic Co-operation and Development’s (OECD) involvement to concrete changes to avoid Base Erosion Profit Shifting (BEPS) has been mentioned. UK’s ‘Google tax’ and the ‘Double Irish Dutch sandwich’ tax evading structure is explained in an effort to elucidate the steps taken by Australian Government to encounter issues similar to them. Facts are stated with regard to the current Australian economy meshing these two new taxes into the existing taxation system. A conclusion is drawn concisely assessing the enforcement of ‘Digital GST’ and ‘Diverted Profit’ taxes and their probable effects on the economy. 1. The need for comprehensive tax reform One of the prime ways of generating economic revenue is to improve the tax capabilities. A good tax system promotes sustainable growth, provides key platform for trade and investments and strengthens the accountability of government to their citizens. The growing complexity in business and technological advances has made it difficult for the existing tax system to keep in pace. Taxes were charged...
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...EPGB6122 Title: “Public Readiness in GST Implementation 2015 - In case of Kuala Lumpur, Malaysia” Prepared by: Noorul ‘Aini Hanifa binti Su’aidi EGC140004 Masters in Public Administration Semester 2014/2015 Public Readiness in GST Implementation 2015 - In Case of Kuala Lumpur, Malaysia 1. Background Taxation is one of the important elements in managing national income, especially in developed countries and has played an important role in civilized societies since their birth thousands years ago (Lymer and Oats, 2009). The introduction of Goods and Service Tax (GST) was first announced in Malaysia Budget 2005, and then projected to be implement in January 2007. In February 2006, government has announced that the implementation would be postponed to a later date. In 2010, it was when Government finalizing the study of the implementation of GST and identifying the social impact of GST on the public and inviting many discussions among expert and GST proponents publicly. The uncertainty on GST implementation cast many doubts as to whether Malaysia needed the GST regime, and if so, what could be the public benefits to the public from this exercise. The government had putting a great effort in promoting the implementation of GST, however an attention to educate the public of GST understanding should be in place as well. Hence, GST is not a new exercise of tax; with more than 140 countries worldwide having had implemented GST, and this is includesd many developed...
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...commencement of GST, the Goods and Services Tax, in Malaysia has been critically received by citizens. This study has been conducted to gauge the level of awareness and approval of GST among IIUM students. The general outlook on GST is negative, stemming from a lack of awareness as to what GST truly is and the taxpayers mindsets (Abdul Mansor & Ilias, 2013). Questionnaires were distributed to random IIUM students aimed at getting their awareness on GST and its implementation. The findings indicate that IIUM students are aware of GST and its imminent implementation and conflicting views on whether or not they approve of its implementation. Perhaps with a little scrutiny and education it might be possible to increase awareness on GST, and may change people perceptions and reception of it, be it positive or negative. 1.0 Introduction In general, Goods and Services Tax (GST) is a consumption tax which is imposed on the sale of goods and services, and it is divided into two categories indirect taxes and direct taxes and is administered by the Royal Malaysian Custom (RMC). The Malaysian government has announced that the new system which will be implemented starting 1st April 2015 at the rate of 6% (Robinson, 2014). The GST (goods and services tax) system will be replacing the present SST (sales and services tax). In the current tax regime, the 10% Sales Tax and 6% Service Tax is collected by one party (usually the seller) and passed on to the tax authorities. For...
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...Concept of Price Elasticity and Total Revenue The importance of the price elasticity of demand for a business can be shown by the effect that it has on total revenue. The business will want to know whether a proposed price change will increase or decrease total revenue. Total revenue, by definition, is equal to the price times the quantity sold (TR=PxQ). [sometimes, when dealing with elasticity, the language used may call this total expenditures instead of total revenue, but it has the same meaning].Note what happens to the results of this formula (TR=PxQ) if a price change is involved. Due to the law of demand, the price will move in one direction, and the quantity sold will move in the other direction. Unless the price change and quantity change are both for the same percentage (unit elastic), then total revenue will also change whenever a price change is involved. The question is, does total revenue increase, or decrease? The answer depends on the direction of the price change along with the price elasticity of demand. If the price elasticity of demand is elastic (greater than 1), then that means that the quantity change is more than the price change. So total revenue (price times quantity) will decrease for a price increase, and increase for a price decrease. If the price elasticity of demand is inelastic (less than 1), then that means that the quantity change is less than the price change. So total revenue (price times quantity), increases for a price increase...
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...The IT Strategy for GST Empowered Group on IT Infrastructure on GST headed by Shri Nandan Nilekani Preface The broad IT plan for enabling GST was presented to the Government of India and the Empowered Committee of State Finance Ministers under the Chairmanship of Dr. Asim Dasgupta on July 21, 2010. This document is a follow-up to that presentation and feedback thereon and describes the IT strategy for GST implementation. This document is at the draft stage, and will evolve as various stakeholders and experts are consulted. 1. 1. Table of Contents Preface ...................................................................................................................................................... 1 Introduction ................................................................................................................................... 2 1.1 1.2 The merits of GST ................................................................................................................................ 2 Urgency .................................................................................................................................................... 2 Desirable features of Goods & Service Tax Network (GSTN)........................................... 3 Stakeholders .......................................................................................................................................... 4 Workflows .............................................
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...next big reform – GST Submitted to – Prof. I. Sridhar By, Ashwin R Golapkar Section E 2012PGP120 TABLE OF CONTENTS Introduction ....................................................................................................................................................... 3 Objectives of Tax reforms ............................................................................................................................. 5 Implementation of the Existing System .................................................................................................. 11 Shortcomings of the Existing Tax Structure .......................................................................................... 13 Alternatives Available in the implementation ....................................................................................... 18 Tax base and Rates ........................................................................................................................................ 25 Implementation of GST in other countries......................................................................................... 37 Data Analysis and Interpretation........................................................................................................... 38 BIBLIOGRAPHY ............................................................................................................................................. 40 LEGAL ASPECTS OF BUSINESS | GST-the next big reform ...
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