Master Class #49-Major Highlights of Malaysia BUDGET 2014

Goods and Service Tax (GST) is applied on value added activities from production stage to retail stage. Well, today we are not likely to cover all off the area of GST with this short period of time because this is depending on the activities. GST also applies on domestic and imported goods and services. The uniqueness about GST is, when you have business input, we called it input tax, and when you sell something, we called it output tax. In an easy understanding,for example, when you buy something and you are paying tax for it, it is called input tax. But when you are selling something you are getting back the input tax, we called it output tax. This mechanism is for both business owner and individual. The mechanism will help the business people to claim back the taxes from the government. Of course, the government also created a threshold of RM 500.000, which means if your business are earning RM 500.000, you are compulsory to register for the GST. However, if your earning is below that, you can do it in the voluntarily basis. So it means you can get away from GST. So, some of the people might think that I can separate my company into two sub-company to run away from GST. Yes, you can but you can’t claim back your taxes from the input tax mechanism.

Every time you supply something then you have to pay GST, except these two things below, zero-rated supply and exempt supply. Zero-rated supply means that good and services supplied by business which are charged at zero rate which is also below 6% but GST paid on their input can be claimed back as credits. Examples, for goods, basic food supply, first 200 unit of electricity to domestic, and supply of treated water. For services are service rendered to a person who is outside Malaysia, insurance relating export of goods and advertising services made outside malaysia. These are outside Malaysia. These are zero-rated supply goods and services, the good thing of it is you can claim back your input tax as credits. However, the another called exempt supply which means the good and services supplied by business are not attract GST but GST paid on their inputs and it can not be claimed back. For zero supply, you can claim back, but for exempt supply, you can not claim back. Examples, for goods are land and building that used for residential, agriculture, burial and religion. And, for services are children services, education services, healthcare services, public transport and toll.

For implementation of GST, basically all of us will pay more taxes. And the public will start to disagree on paying more tax. But the government is doing the reduction of other taxes as well. Well, in my opinion, the reduction of income tax is too little. But there are two types of good reduction taxes which are training grant of RM 100 Million for GST training of employees and financial assistance of RM 150 million for the purchase of accounting software by SMEs. Because you need a accounting software which helps you to combine GST and your company accounts. So they have this financial assistance for you to claim back the money that you spent on these softwares and the grant for you to training. For those having business, and you are earning more than RM500,000, if you want to do it on voluntarily basis, I think you need to be alert on the launch in the town which will be on 2014, because with this package, you can use the training grant and the software.

GST is fairer tax system is because GST is basically about the more you spent, the more you pay. For those who knows how to plan your spending, in fact, you not paying much tax than other people. In fact, GST is spent more on luxury things, which means you have to pay more. So, it is a wider more taxpayer group. This is because, at this moment, the figure shows less than 10% of the working group are taxpayer. The figure also shows that 1 to 2 million of taxpayer while the other 16 million people are from the working group which means the working group does not pay tax because they don’t earn enough to pay the tax. Another thing is when you come to GST, the inflation will be high. For example, when the inflation of GST is high, the price of building materials will goes up as well.

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  • May

    Reply Reply November 23, 2013

    Hi, I just got to know about this webinar talk and I have missed it. Is there any link that I can access to hear or watch the video?


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