MIC Youth chief explains the pros and cons of the system


  • Community
  • Tuesday, 20 Jan 2015

Of help: Some medications will be exempted from paying GST. — filepic

THE recent Budget 2015 announcement has helped in some ways to address the issue of the Goods and Services Tax (GST).

The air has been cleared on the GST-free items, including necessities such as RON95 petrol, diesel, liquefied petroleum gas (LPG), bread and medication for 30 types of diseases.

Electricity consumption of up to 300 units will also be GST-free, a move which is expected to benefit 70% of Malaysian households.

GST, which will be implemented on April 1, is estimated to add RM23.2bil to the Government’s revenue while exemptions are expected to total RM3.8bil.

Recently, several questions were posed to MIC Youth chief C. Sivarraajh for his insight on the GST.

This is what Sivarraajh, who is also Mentri Besar Datuk Seri Dr Zambry Abdul Kadir’s special officer, had got to say.

1. What you know about GST?

GST, which is also known as VAT, or the value added tax in many countries, is a multi-stage consumption tax on goods and services. We need to pay taxes so that the government can finance socio-economic development; which includes providing infrastructure, education, welfare, healthcare, national security etc.

Over the past few decades, the worldwide trend has been for the introduction of a multi-stage GST system. Today, almost 90% of the world’s population live in countries with GST, including China, Indonesia, Thailand, Singapore and India.

2. How will it affect you?

As a common citizen of the country, we have expenses, which are basic expenditure (food, transportation, etc) and need-based-expenses (lifestyle expenses).

If the basic expenses and lifestyle expenses were to be taxed, then the general consumption product prices will rise due to the chain effect. In other words, the cost of living mainly in urban areas will see a significant rise.

3. What are your fears?

My biggest worry is that due to the implementation of the GST, the general consumption price will definitely rise due to the chain effect, and it would cause the rise of other products that is listed by the government under the non-taxable products.

4. How will it affect your community?

In the perspective of the Indian community, we still hold a substantial percentage of the nation’s purchasing power value. In that sense, 65% of Indians (the lower and the middle income group) will definitely be affected with this rise. The economic status of the general Indians in the country is still below national average. Therefore, we may see a serious financial crisis within the community if the chain effect due to GST is not handled carefully.

5. Are you worried that businesses may take advantage of GST, and increase prices of goods?

Yes, that would be my biggest worry. Some irresponsible business owners will definitely use GST as a reason to make profits and make use of the situation.

6. Do you think investors will shy away?

No, I don’t think investors will shy away because most of the major countries are already practicing the GST concept of taxation system. It would not affect the investors or business operators but the end users or consumers are at risk.

7. Do you think most youngsters working overseas will not come back to the country to work due to the implementation of GST?

No, I don’t think so. Currently, many Indian youths are working in Singapore, India and Australia. The GST rate in Singapore is 10%, India (12.5%) and Australia (10%), so the rate is significantly higher if compared to that in Malaysia. Most of the countries are now already beginning to impose the value added tax. So the question of youths not coming back to Malaysia to work does not arise.

8. With the GST in place, do you think the government will find ways to alleviate the burden of the rakyat?

Definitely the government will find ways to help the rakyat. The current subsidy system and BR1M will help the people.

Moreover, the list of Zero-Rated Tax items released by the government mainly for basic necessities such as food, water, transportation, medical and hospitals, education, housing, banking and finance facilities, telecommunication and etc will definitely ease the burden of the rakyat.

9. With the cost of living on the rise and now with GST, will people be living a more stressful life?

Of course yes! But managing stress is in our hands.

The urban residents will largely feel the impact of GST. We hope people will learn to save money and be prudent when spending.

On the other hand, for our country to compete in the global arena and open market, GST will create a friendlier eco-system since it will ensure a single-tier taxation system. Therefore, both pros and cons must be handled with care.

10. How will GST help the lower income group compared to the higher income group?

GST will increase the revenue of the government by RM22 billion. The revenue from GST could be used for development purposes for social infrastructure like health facilities and institutions, and educational infrastructures, and public facilities to further improve the standard of living.

Specifically, the basic necessities or expenditures of the lower income group are non-taxable and as such the lower income group will feel more secure and would not feel the impact too much.

The higher income group is the biggest contributor to the GST as due to their lifestyle expenses, many will be taxable under the GST. As such the lower income group is within a safe border despite the implementation of the GST.

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