SECOND Finance Minister Datuk Seri Dr Ahmad Husni Hanadzlah’s special assistant Ting Tai Fook has travelled around the country to give talks about the goods and services tax (GST) to the community.
In all his talks, Ting explained extensively about the tax system that would be implemented from April 1 to replace the existing sales and service tax.
He has been bombarded with lots of questions from the public and now, The Star talks to Ting to get more answers about GST.
1. What was your first impression of the GST before the Government decided to implement it?
Ting: I read and knew about GST when it was first mooted by the Government couple of years back. It is also known as Value Added Tax (VAT) and I knew that it was a good system. I think most people are familiar with VAT’s concept which is used overseas. We show the receipt to the Customs officers and get a tax refund. Many other countries around the world have already implemented the GST.
2. What are the biggest misconceptions about the GST?
Ting: Most people think that the GST is a new taxation mechanism. They think that the Government would include both the GST and SST together, increasing the people’s burden, which is wrong. GST is not only implemented in developed countries but also other countries. About 160 countries have it.
3. How will GST affect or benefit the people from the lower- and middle-income groups?
Ting: The GST will let people in general be more aware about consumerism. With increased awareness, they can make comparisons and avoid buying over-priced products that have high profit margins. The GST is more transparent and the Government can reduce tax evasion and money laundering, while getting more revenue to provide more aid to the people and build public infrastructure.
4. Most people feel that the cascading effect of implementing taxes from manufacturer to consumer will cause price inflation. How will it affect the prices of food, clothing, electronic gadgets, cars and houses?
Ting: The current sales tax charges 10% while the service tax is at 6%. Starting next April, the GST will only charge 6%. Prices of the items should be reviewed and we know that prices are not determined by just GST because there is a law in economy – demand and supply. The cascading effect only occurred with the SST because GST allows input tax claims. It is impossible that the 160 countries with GST are facing price inflation without control. The Government will monitor and ensure that the inflation would become stable months later after GST is implemented. Most of the goods with the SST of 10% will reduce to 6%, so prices of items definitely need to be adjusted and businesses must learn the ins and outs of GST to avoid transfer pricing and increase profit margin.
5. Will the government do anything to curb inflation and to help the people cope with the implementation of GST?
Ting: The Government will continue to give out 1Malaysia People’s Aid (BR1M) and also introduce a RM300 GST Voucher for the lower-income group. The Government will monitor the market from time to time to curb inflation and we always welcome foreign investors as well as foreign tourists to boost our economy and increase the purchasing power by giving more tax rebates to individuals and also tax incentives for companies.
6. People are also worried that the GST will affect the price of healthcare, how will it affect the cost of medicines and consultation?
Ting: Healthcare services are exempted from GST, which means consumers are not supposed to pay for it. Hospitals or clinics have to absorb the input tax and the Customs Department will list out items that are entitled for input tax claim.
7. How will GST affect our electricity and water bills?
Ting: The GST will be imposed for usage of 300kW and above while water usage is exempted from it. It is, however, not applicable to commercial purposes.
8. Will GST affect sales of registered companies (revenue above RM500,000) compared to those that did not register?
Ting: No. Consumers would like to know how much tax they paid. Registered companies with high profit margin aim will definitely be less competent compared to other companies who sell the same item but at lower prices even with GST included. Tourists will come and buy more after GST implementation because they are entitled to the tax refund (for selected items). The Government aims to promote the tourism industry and the GST is coming in at the right time to give local businesses a boost in sales.
9. What are the benefits of the GST for companies that have registered to be eligible for the tax claim?
Ting: Input tax claim allows companies to save more money on the raw or business materials purchased. Previously, companies are not allowed to claim input tax. It will also increase their competitiveness.
10. There are still a lot of people that are not familiar with the GST, what other measures will be taken to explain the tax system to them?
Ting: Those interested can visit www.gst.customs.gov.my or call the Customs Department to get more information. Many people are not familiar with GST because they receive different information from unknown sources. We would like to urge them to get the information from the right persons and not be misled by certain quarters who have a hidden agenda to avoid GST implementation.