GST to SST, how will the new tax system work?

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Filepic: NST

Following the zero-rating of the GST, Malaysians enjoy from a "tax holiday" to the implementation of SST

Recently, there has been a lot of talk about what the return of SST will bring and how While previously, the tax on products and services (GST) is imposed on users who use goods and services at each stage of the chain for end-users, sales and service tax (SST) is considered as a cost to the business, a tax at a level that is charged to the manufacturer only and there is no claims mechanism.

Senthuran Elanlingam, a Service Manager indirect taxes for a Kuala Lumpur-based Malaysia and Asia-Pacific tax advisor recently compiled a comparison between the GST based on past consumption and the impending SST to show how b Tax systems work without advocating any political platform or favourisme. He participated in the following article, published in New Straits Times.

Much has been said recently about the Goods and Services Tax (GST) and the Sales and Service Tax (SST). consumers. There is also a lot of information that has been made available to the public through various sources, including social media, which sometimes adds to the confusion over how these taxes work.

The purpose of this article is not to support but to help the public understand the operation of these taxes and their application to the purchase of goods and services, so that the public is better informed of the question.

Goods and Services Tax [19659007] The GST is a multi-stage tax, which means that it is levied at each stage of the supply chain. In simple terms, each company is effectively required to charge and collect tax on the sales of goods or services they make (unless they are expressly excluded). However, a major misunderstanding about the GST is that it is perceived as several tax slices on the tax

This is not the case since the company may apply for a credit on the GST paid on the purchase of goods and services. 19659007] In the case of our illustration of the GST, a total of RM6 is collected by the Royal Malaysian Customs Department (RMCD) through the distribution chain. RM0.60 from the raw material supplier, RM2.40 from the manufacturer and finally RM3.00 from the retailer. Importantly, this RM6.00 is equal to what the end consumer actually pays on the purchase of the table, ie, RM6.00.

So the key points to note are:

GST is a tax on final consumption

GST is collected at all stages of the supply chain

The GST is a credit system that allows businesses to offset the GST paid on purchases so that there is no double taxation

However, even if the GST s & rsquo; applied to most goods and services, there were many exemptions and zero-rated items, including staple foods, medications, public transportation, taxis, and so on.

Sales and Services Tax

The first thing to clarify is that there is no tax on sales and services. It's the sales tax and the service tax, which are two separate taxes. These taxes are not new and existed in Malaysia since the 1970s and were removed only in 2015 when the introduction of the GST

Filepic: NST

Sales Tax

Sales tax is a single-stage tax applied to importers and manufacturers of certain regulated products. It has rates of 5.0% and 10% and is levied by manufacturers or importers.

There is no credit mechanism for taxes paid.

It should be noted that the illustration is a very simple example the tax works. Today, companies have complex supply chains and pricing decisions are influenced by a number of factors, including tax.

Service Tax

a rate of 6.0% for services included in the scope of application.

Am I paying twice the tax under the TVS?

Much has been written about whether consumers would be taxed at 16%. This is not correct and it is not so that these taxes would work. By saying that it is possible for a consumer to purchase an item that has been subject to sales tax and service tax, the scope of those taxes is narrow and there is no a lot of crossing. When this crossover occurs, the total cost should not be 16%

The key points to note about SST are:

Two separate taxes – Sales Tax and Services Tax

Not a new tax Malaysia and existed for a long time

Collected only at one stage of the supply chain and applying to a more restricted set of goods and services

It is possible that the sales tax and the tax on services apply It is wrong to say that it is a tax of 16 percent

. As the sales tax and the service tax are single-level taxes that only tax one stage of the supply chain, the tax net. It can be a good thing and a bad thing. This means that fewer businesses are affected and must incur costs to comply with it, but it also means that it allows more companies to avoid collecting the tax.

These are questions inherent to the tax which, it is hoped, will be settled reintroduced.

– NST