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3.

0 REFLECTION
Recently, the government initiative to introduce Goods and Services
Tax (GST) has been a growing topic of interest in Malaysia. Despite
the increasing popularity and success of GST implementation
around the world (Hooper & Smith, 1997), Malaysian citizens are not
entirely convinced with this new tax scheme. The debates mainly
centered on the advantages and disadvantages derived from the
new tax initiative. According the reflection of understanding and
effect of GST from the six students that we interviewed in Universiti
Utara Malaysia (UUM), we can see that GST is a tax that replaced
Sales and Service Tax (SST), had effect on risen of their daily
expenses, there are exemption for basic necessities, introduced by
present Prime Minister (Mohd Najib Tun Razak) and generated
income to government.
Service Tax is a form of indirect tax imposed on specified
services called "taxable services" while sales tax is a single stage
tax imposed at the import or manufacturing levels. Service tax
cannot be levied on any service which is not included in the list of
taxable service. 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, and service etc.
Service Charge is not compulsory and it dependent on premises
basis. Some restaurants may charge from 5% to 10%. This charge is
not implemented by the government and is typically implemented
restaurants and hotels. Generally, the imposition of service tax is
about 6% (GST Malaysia, 2013).
Sales tax is levied and charged on all taxable goods imported
into or manufactured with sales over RM 100,000 in Malaysia.

Certain non-essential foodstuffs and building materials are taxed at


5%, general goods at 10%, liquor at 20% and cigarettes at 25%.
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. Sales
tax is generally at 10%. The total charge of SST is 16% (GST
Malaysia, 2013).
GST is a consumption based tax and is totally different tax
from the current tax system. All items and services from all chain
levels are subjected to GST (minus some essential items) thus GST
generally has a far wider coverage compared to existing tax system.
Unlike the previous sales tax or service tax which is a single stage
tax, GST is a multi-stage tax. Payment of tax is made in stages by
intermediaries in the production and distribution process. The tax
itself is not a cost to the intermediaries since they are able to claim
back GST incurred on their business inputs. GST is imposed on
goods and services at every production and distribution stage in the
supply chain including importation of goods and services. In GST the
final tax burden will ultimately will be borne by consumer.
In the case of Malaysia, the introduction of GST is part of the
overall Government tax reform programme towards making the
taxation system more efficient, effective, transparent, business
friendly and capable of generating a stable source of revenue. GST
is to replace the current consumption tax comprising of SST (Gst,
n.d.). Besides that, the informality and confusion surrounding the
Service Charge has caused misconceptions amongst the public,
many of whom believe that the 10% levy is a tax from the
government. With the confusion surrounding the 6% Goods and
Services Tax (GST) replacing the 10% and 6% Sales and Services Tax
(SST), many consumers believe that the Service Charge will be
consolidated

into

the

6%

GST

.But

according

to

students

knowledge, they only know that GST is a replaced SST tax while
actually is implemented some different tax and included SST.
The shift of Malaysian tax system to GST contributes to
numbers of changes made to Malaysian tax legislation. This system
requires all goods and services excludes few necessity items will be
charge at 6% to be includes in the final selling price paid by end
users including all group of ages. GST is a tax charged on the supply
(including sales) of goods and services made in Malaysia and on the
importation of goods and services into Malaysia. Even though GST is
charged on the sales price of the goods or services, the amount to
be remitted to the Government is only on the value added to the
goods or services at each level of the distribution or supply chain.
The value added is the value that a producer whether a
manufacturer or distributor and so on, adds to its raw material or
purchases before selling the new or improved product or service. To
enable this, GST adopts a credit offset mechanism whereby GST
charged on the output of the business (for example, sale of product
manufactured or services supplied) is offset against the GST paid on
the goods or services acquired as inputs (for example, raw materials
or utilities to be used in manufacturing) by the business. GST
charged on output is called output tax. Whereas, GST incurred on
acquisition is called input tax. This offsetting mechanism is to
ensure GST paid by businesses are recoverable and thus help to
reduce the costs of doing business (Gst, n.d.). Therefore, the
reflection from the interviewed of the six students about GST had
burdened their daily expenses. Because with this method of
taxation, the business will charge on consumer to make sure income
in result of inflation and prices that we buy will become higher. This
is main cause of the introduction of GST would reduce the lower
income groups ability to purchase goods and services. Be in real,
seller can claim back the tax that they paid after they achieved
specific sales.

Luckily comes to some good news which is a total of 900 basic


items and 2900 medicine items that will be zero rated. Included rice,
sugar, milk powder and flour will be listed as zero-tax items, while
essential services, such as healthcare, may be classified as taxexempt. All the exempt supply companies sold goods and services
are free from GST. No GST will be charged on these goods and
services (Gstmalaysia, 2014). Basic necessities will be exempt from
being charged with the Goods and Services Tax (GST) to ensure that
the lower-income group will not be adversely affected, said Second
Finance Minister Datuk Seri Ahmad Husni Hanadzlah. Consumers will
also not be charged extra for services such as healthcare and
private education, public transport, tolls and properties. This means
that the GST will not be imposed at the final part of the services
charges chain. He also said over 160 countries had implemented the
GST and although there was a slight inflation at the beginning, the
Government was committed to ensure that consumer prices
remained low (theStar, 2013).
Everyone also claim that GST is introduced by present Prime
Minister, Mohd Najib Tun Razak. In fact, on 21 October 1988, Tun
Daim Zainuddin, the Minister of Finance on 1988 had told Malaysian
public that government been considering implementing the GST. On
20 October 1992, Dato Seri Anwar Ibrahim, the Minister of Finance
had announced GST for 1993 in Malaysian budget it was later
deferred. On 10 September 2004, Dato Seri Abdullah Badawi, the
Prime Minister at that time announced GST for the 2005 Malaysian
Budget which would have come into effected by 1 January 2007. It
was then deferred in 2006 to give time for business to adapt to
changes in processes and training of personnel. In 2005, Malaysia
had sent a team to visit nations such as Ausiralia, New Zealand and
Indonesia

for

cross-country

learning

and

further

study

the

mechanism of GST. As a step to developing a more effective,


efficient and sustainable taxation system, the 2009 GST TaxBill was
tabled for reading at the Dewan Rakyat. It was deferred again to

ensure laws and regulations relating to the implementation are all in


place and the people will be engaged inclusively. Finally, On 25
October 2013, Prime Minister Datuk Seri Najib Razak declared GST
of 6% in Malaysia. It will be commence from 1 April 2015. Based on
the interviewed students, we can know that they just know is our
present introduced and implemented the GST. But in actual, GST
taxation system has been prepared since 1988. This taxation
system must implemented in our country (Ali, 2015).
There is no doubt, tax is a major contribution of governments
revenue collection in any countries, including Malaysia. The
proposed Goods and Services Tax (GST) at 6% will contribute a
revenue of up to RM22 billion to the governments coffers annually.
Why should GST implemented? This is because

SST was a

inefficient tax system where it was easy to avoid paying taxes


causing a huge outflow for the government. GST is more efficient as
people are taxed on their consumption, the more they consume, the
higher the total amount of taxes that they will pay. It eliminates the
presence of the cascading effect which reduces business cost for
producers,

eliminates

double

taxation

and

increases

the

competitiveness of exports as exports are not taxed. GST also helps


alleviate the burden of poorer people as basic necessities are zerorated. GST is part of the overall tax reform to make the taxation
system more effective, efficient, transparent, business friendly and
capable of generating a more stable source of revenue. In the long
run, a more effective and efficient tax system will help in reducing
the fiscal deficit in Malaysia. The Royal Malaysian Customs (RMC)
believes GST is a good solution to fix leakages in the current
consumption tax collection and result in the extra revenue. The GST
has been proposed as part of the federal governments commitment
to reduce its budget deficit and with the view of achieving a
balanced budget in 2020 (freemalaysiatoday, 2013).

According to the survey, we can see that undergraduate


student dont understand thoroughly about taxation system in their
country. We think that undergraduate students should have the
fundamental knowledge of taxation (Mohani, 2003). Tax knowledge
can be imparted through general understanding on the tax
regulations. Knowledge provide the taxpayers with the ability to
comprehend the need for a new tax reform and this would
eventually promote compliance (Singh, 2003). A study conducted by
(Csontos, et al., 1998) in Hungarian found that many citizen are not
aware of the numerous kind of taxes levied on them. They have very
limited knowledge on government true expenditures and the cost of
public services provided by the state government. This poor
awareness has created many misconceptions on the true value of
tax.
References:
Ali, M. R. (2015, March 18). Overview Gst. Retrieved from Latar
Belakang

GST

di

Malaysia:

http://www.ukm.my/bendahari/wp-

content/uploads/2015/04/Latar -Belakang-GST-di-Malaysia.pdf
Csontos, L., Kornai, J., & Toth, I. G. (1998). Tax awareness and reform
of the welfare state: Hungrian survey results. Economics of
Transition, 6(2), 287-312.
freemalaysiatoday. (2013, November 22). Retrieved from RMC: GST
at

6%

to

raise

RM22b

revenue:http://www.freemalaysiatoday.com/category/business/2013/
11/22/rmc-gst-at-6-to-raise-rm22b-revenue/
Gst.

(n.d.).

Retrieved

from

FAQs_general:

http://gst.customs.gov.my/en/rg/SiteP ages/FAQs_general.html
GST Malaysia. (2013, March 31). Retrieved from Gst vs sales tax:
http://www.gst malaysia.co/gst-vs-sales-tax/27/

Gstmalaysia. (2014, October 13). Retrieved from GST zero rated


exemption

supply

list:

http://www.gstmalaysia.co/gst-zero-rated-

exemption-supply-list/158/
Hooper, P., & Smith, K. A. (1997). A Value-Added Tax In U.S.A: An
Argument In Favor. Business Horizon, 78-83.
Mohani, A. (2003). Income tax non-compliance in Malaysia. Petaling
Jaya: Prentice Hall.
Singh, V. (2003). Tax compliance and ethical decision making: A
Malaysian perspective. Petaling Jaya: Longman.
theStar.

(2013,

June

http://www.thestar.com.my/ne

28).

Retrieved

from

Nation:

ws/nation/2013/06/28/no-gst-on-

basic-necessities-move-to-ensure-lowincom

e-group-not-adversely-

affected/
ssm-syarikat. (n.d.). Retrieved from Indirect Tax - Service Tax & Sales
Tax: http:// ssm-syarikat.com/Service-tax-sales-tax.html