Najib’s maiden budget take 2: GST
By Lee Wee Tak
According to his maiden budget speech, Najib mentioned that the study for Goods and Services Tax is in its final stage. GST has wide implications and I hope he can have consult the relevant stakeholders.
During Badawi’s administration, I attended a GST seminar organized by an Australian consultant and he mentioned that the people in the banking industry was not adequately consulted hence proposed GST implementation was in question. Banking industry itself has very different products from consumer market. The question was answered a few weeks after the seminar.
In a nut shell, GST works like this
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 implications could be summarized as follows:
1) A wider tax collection basis.
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.
Proponents of NEP claim that majority of the poor are Malays hence the consequence is that those who previously not been paying tax, might be caught.
Read more at: http://wangsamajuformalaysia.blogspot.com/2009/11/najibs-maiden-budget-take-2-gst.html