GST Implementation in Malaysia

by Sally Wong

On the 1st of April 2015, Malaysia went live with its Goods and Services Tax (GST) implementation throughout the country. The GST is generally looked upon by the public as something detrimental to the well-being of the people although on the same note many do agree that it is good for the country. The government on the other hand have faced tremendous amount of criticism over how it went about implementing the GST policies.

GST is one of the most popular taxation systems in the world having been adopted by over 150 countries. This taxation method is deemed to be the most fair as it is based on consumption and only applies to those who can afford such products or services. Most of the essential goods and services such as basic food items, education, transport and more are either zero rated or exempted from the tax and as such the poor and the economically challenged groups would not be affected so much by it.

The GST also does not apply to businesses as it is a tax based on consumption at the furthest end of the supply chain, namely the consumers. Businesses can claim their GST expenditure at the end of the tax period and at the same time are required to charge the 6% on their sales and will need to pay the taxes collected. This will pose a huge administration burden to businesses as they will be forced to track and document all their purchases as well as their sales. This burden of administering and documenting is a heavy on businesses as they will be forced to manage and document huge amount of financial records which involves their daily purchases and sales transactions and to properly apply the proper tax codes. This itself is poses a huge problem as many businesses feel that they are not ready.

We spoke to a top financial expert, Datuk Dr.Elamaran Sabapathy to get his views on the impact that the GST has on the Malaysian people. Being a successful entrepreneur and an management consultant, Datuk Dr.Elamaran commented that with the implementation of GST, there is bound to be a short term inflation of prices as businesses will be forced to offload some of the costs associated with the GST on to their customers. According to Datuk, the initial period of 6 to 8 months will be most crucial as it will determine how businesses and consumers are adjusting to the changes brought about by GST.

He further added on that, this will also be an ultimate test to the enforcement body name the Royal Malaysian Customs who will need to show that they are serious in enforcing the GST Act as well as the Anti Profiteering Act which are laws which are enacted to protect consumers from unscrupulous businesses who take advantage of the GST implementation to mislead the public through bad business practices.

The success of the GST implementation lies in the hands of the businesses as they are faced with the responsibility of managing the tax through their submissions to the Customs Department and therein lies the most difficult of challenges. The Royal Malaysian Customs must enforce the laws if ever they hope for the success of GST in Malaysia.

The effects of the GST has already been felt especially in the Hospitality sector where there is a huge debate on whether F&B outlets should impose their service fee on top of the service tax. Other sectors are also sought with many such issues as well.

It remains to be seen on what the real impact GST has towards peoples lives.