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GOODS AND SERVICES TAX (GST) is value added tax. When there is value add activities, it attract GST. Yes, end consumer pays. Intermediate buyer pays for value added portions. For example:
A sells material to B for RM100 x 106% = RM106.
B then incurs additional RM100 cost to add flavours or process the material into goods. So B incurred cost of buying material at RM106 plus RM100 value added costs and then less claimable GST of RM6 = RM200.
B sells to C the product at RM300 x 106% = RM318.
C then incurs additional RM100 cost to repackage, transportation fees and marketing costs. So C incurred cost of buying goods at RM318 plus RM100 value added costs and then less claimable GST RM18 = RM400.
C sells to D the finished product at RM500 x 106% = RM530.
So the Government gets revenue of rm30 from the above scenario.
The formula SST would have resulted in the below:
({[(Rm100 x 110%) + rm200] x 110%} + rm200) x 110% = RM595.
So GST makes it RM530 but SST makes it RM595. Both methods make end consumer pay extra but the former only at RM30 and the latter at RM95.
Not only it is taxed at a higher rate of 10% SST, but the effect is also compunding making it more expensive as and when there are more value added activities up the value chain.
So some products that were taxed at SST of 10% to 15% now become cheaper if apply GST as shown in the above prices from RM595 down to RM530.
Some products that were not taxed at all previously will now be more expensive by 6% if apply GST as shown above where prices increase from RM500 to RM530.
Basic staple products at 0% GST remains the price at the same level where in the above scenario, remain at RM500.
All these are hypothetical. In the real world, many businesses jacked up prices well above the impact of GST. Yes, they are very, very irresponsible and may Allah burn their balls in hell.
The GST would have brought in RM40 billion revenues to the Government as opposed to SST that can only bring in RM20 bilion. The difference of RM20 bilion is approximately 8% of Malaysia's annual budget of around RM250 billion.
That is a lot especially when the nation is susceptible to the volatile revenues from oil and gas sources. RM20 billion can certainly contribute a lot to building schools, roads, supply electricity and water or even develop infrastructure such as MRT.
There are many ways that SST is not efficient and easy for people to evade. But I cannot remember those points. We will have to ask experts who were involved in devising GST. GST is supposed to be applied over a wider consumption base as opposed to SST and its mechanism makes it difficult for people to evade taxes.
GST is certainly a more effective and efficient system compared to Income Taxes and Company Taxes as those two are easily prone to tax evasion. Many of the SME businesses in Malaysia lie in their tax returns. How many times have you seen SME business men showing loss making accounts but yet, drive a BMW? I have seen many.
GST makes it possible for those who spend more, pay more taxes and vice versa. It is a method of redistributing wealth by taking away more from the rich and less from the poor.
Based on economics, fiscal policy and fair mix of capitalist and socialist spirit, GST is, in my humble opinion, a better tax regime. It may not solve all of the nation's problems but it can at least buy us the rights for the World Cup football for many years to come, if the Rakyat insists on it.
So, I am hoping that GST will be reconsidered as our nation's consumption tax method. If it cannot be implemented this year, perhaps 61 years from now - apparently, as history dictates, that is a fair expectation to predict the next change of Government.
* kopihangtuah
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