My Master Slides Presentation

1. ECONOMIC ANALYSIS - IMPACTS OF GST ON Living
Standard, Industry & Trade
Prepared For
Dr Azlina Hanif

3. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

4. What is GST?
 a short form for Goods
and Services Tax
 also known as Value
Added Tax (VAT).
 is a consumption tax
based or is a multi-stage
consumption tax on
goods and services.
 Malaysia standard rated
supply is 6%

5. Standard-
rated supplies
Zero-rated
supplies
Exempt
supplies
Supplies not
within the
scope of GST
Types of supplies

6.  subject to a proposed rate of 6%
 collected by the businesses and paid
to the government
 recover credit back on their inputs
 Taxable supplies of goods and services
which are subject to GST 0% rate
 businesses do not collect any GST on
their supplies but are entitled to claim
credit on inputs
 goods and services which not
subjected to GST
 businesses do not collect any GST on
their supplies and are not entitled to
claim credit on his business inputs
 do not fall within the charging provision
of GST Act include non-business transactions,
sale of goods from a place outside Malaysia
to another place outside Malaysia as well as
services provided by the Government sector.
Supplies not within
the scope of GST

7. Standard-
rated supplies

8. Zero-rated
supplies

9. Exempt
supplies

10. Calculation of GST

11. The flow of GST collected

12. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

13. Overview
GST is only a replacement for
the current sales and services
tax known as SST
 taxing system more
efficient and transparent
 due to the inherent weakness under the
present tax system is the cascading tax, double tax,
pyramiding tax, tax erosion, leakages through
transfer pricing and so on in Malaysia
Standard-
rated supplies
Zero-rated
supplies
Exempt
supplies
Supplies not
within the
scope of GST

14. Malaysian Tax History
In Malaysia, our tax system involves several different indirect taxes:
•Import duty
• On goods brought into the country
•Export duty
• On goods produced for sale outside the country
•Government Sales Tax
• On a wide range of goods at the point of import or at the manufacturer's
level, with four tax rates at 5%, 10%, 20% and 25%
•Service Tax
• On services provided by restaurants, hotels, telecommunications
services, professional services by architects, engineers, lawyers etc.
•Excise Duty
• On luxury and 'sin' products such as automobiles, liquor, beer and
tobacco products
**The proposed GST will replace the Government Sales Tax and the
Service Tax.

15. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

16. DefinitionLIVINGSTANDARDS
The level of wealth, comfort,
material goods and
necessities available to a
certain socioeconomic class
in a certain geographic area.
Living Standards

17. Indicator
IMPACT ON PRICES OF GOODS AND
SERVICES
IMPACT ON INFLATION RATE
IMPACT ON COST OF LIVING
LIVINGSTANDARDS

18. Cost of Living
ImpactLIVINGSTANDARDS

19. Effect on household expenditure
Impact
Comparison of tax burden under GST with that of the current sales tax and
service tax (SST) based on average monthly household expenditure of various
income groups are shown as follows:
Income
Group
Average
monthly
expenditure
(RM)
SST GST
Tax burden
(%)
Tax paid
(RM)
Tax
burden
(%)
Tax Paid
(RM)
Poor 570 2.38 13.57 2.17 12.37
Lower 1,856 2.75 51.04 2.43 45.10
Middle 3,767 2.94 110.75 2.57 96.81
High 7,211 3.13 225.70 2.74 197.58
Average 2,041 2.88 58.78 2.53 51.64
Notes:
Poor: Income less than RM800 per month
Lower: Income from RM800 to RM1,999 per month
Middle: Income from RM2,000 to RM 3,999 per month
High: Income RM4,000 and above per month
SST: Sales tax and service tax
LIVINGSTANDARDS

20. Inflation rates
 The rate at which the general level of prices for goods and
services is rising and, consequently, the purchasing power of
currency is falling.
Impact
Inflation rate is also inching up, consistent with the experience of other
countries that implemented GST, plus hikes in fuel and gas prices.
LIVINGSTANDARDS

21. Inflation rates in other countries
ImpactLIVINGSTANDARDS

22. Prices of goods and services
Impact
 Mixed impact on prices of goods and services due to the
standard-rate, zero-rate and exemptions under GST; with
GST being a replacement of the Sales Tax and Services Tax;
and promotions by some businesses & industries to mitigate
the impact.
 The price effects of GST include:-
 Lower car prices by up to -5%
 Higher prices of especially processed food and beverages
 Some businesses/industries are absorbing GST
 Public transport exempted from GST but fares are rising,
beginning with taxis, with more coming.
 Post-GST issues on several categories of goods and
services
LIVINGSTANDARDS

23. Price effects of GST
Impact
1) Lower car prices by up to -5%
LIVINGSTANDARDS

24. Prices of goods and services
Impact
2) Higher prices of especially processed food and beverages
LIVINGSTANDARDS

25. Prices of goods and services
Impact
3) Some businesses/industries are absorbing GST
LIVINGSTANDARDS

26. Prices of goods and services
Impact
4) Public transport exempted from GST but fares are rising,
beginning with taxis, with more coming.
LIVINGSTANDARDS

27. Prices of goods and services
Impact
5) Post-GST issues on several categories of goods and services
LIVINGSTANDARDS

28. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

29. SectorINDUSTRY

30. Industries
TOURISM & HOSPITALITY
FINANCIAL SERVICES
PROPERTRY & CONSTRUCTION
AUTOMOTIVEFOOD & BEVERAGES
OIL & GAS
ENTERTAINMENT
INDUSTRY

31. PerceptionsINDUSTRY
Consumer concerns regarding the GST have been over price
increases, whereas businesses concerns have focused on
compliance costs and its effect on
competitiveness.

32. ManufacturersINDUSTRY
raw materials
components
utilities
capital assets
services
except zero-rated
subject to GST
exempt supplies
In order to avoid
double taxation,
manufacturers are
allowed to claim
input tax credit
on any purchases
that are inputs to
their business.
Standard - rated
Zero - rated
Eg, All supplies of
goods exported from
Malaysia and
international services
Eg, taxable and include
all supplies made by
the manufacturer
LOCAL & IMPORTED
MANUFACTURING
INPUTS
HOW CATEGORIES

33. ProcessINDUSTRY
Application of business assets for non-business
purposes
Business gifts exceeding RM500 given to the
same customer in the same year
Goods which are business assets on hand at
deregistration
Employee benefits given to employees
The Customs Department will refund the net
difference to the manufacturer if the input tax
is larger than the output tax payable.
Disposal of business assets
HOW STANDARD-RATED OUTPUT WORKS?

34. SchemesINDUSTRY
INCENTIVE SCHEMES BY GOVERNMENT
Warehousing
scheme
Special Approved Toll
Manufacturer Scheme (ATMS)
Approved Trader Scheme
(ATS)
Petroleum IndustryManufacturing subsectors Automotive Industry
A taxable person can apply if the
value of supplies for further
treatment or processing is RM 2
million or > , the final
treated/processed good is sent
back to the overseas principal,
and at least 80 % of the finished
good is exported.
GST on goods, including
imported goods, is suspended
when the goods are stored
in a warehouse or
transferred between
warehouses.
Allows manufacturers to suspend
GST payment on imported goods,
and will benefit re-exporters of
imported supplies by providing
access to cash flows as
they will have large input tax credits
and no output GST.
GST regulations require all taxable
businesses to keep their tax payment
records for seven years.
General GST guidelines apply
broadly to all major
manufacturing
subsectors like
petroleum, automotive, base
metals, and fabricated metal
products.
In terms of downstream implications, as
of April, the GST has been imposed only
on RON97 petrol, while RON95 and diesel
prices remain the same. As for upstream
implications, companies carrying out
upstream activity in Malaysia (including
offshore) must sign a Production Sharing
Contract with Petronas. The upstream
petroleum GST guide recommends that
companies register under the GST in
order to be able to claim input tax credit.
According to the Customs
Department and Malaysian
Automotive Institute (MAI), car
prices are expected to decrease by
one to three percent. At the same
time, car manufacturers are split on
the impact of the new tax regime.
Some warn that the prices are going
to increase, while others expect
them to stay the same or
decrease.

35. ImpactINDUSTRY
Lead to the creation of a unified market for
facilitating seamless movement of goods
across states. This is expected to reduce the
transaction cost of businesses.
Firms will benefit from lower warehouse
cots, more efficient supply-chain planning
and inventory reduction.

36. SampleINDUSTRY

37. ImplementationINDUSTRY
How sales tax and GST are applied in car pricing

38. INDUSTRY
Basic GST mechanism
Implementation

39. INDUSTRY
How will new car prices be affected?
Sales tax mechanism versus GST mechanism
Auto sector would benefit from reduction in duties on large SUVs and cars
as GST rate is likely to be lower than the present excise plus VAT rate.
Tractors may be taxed at lower rate in GST.
Implementation

40. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

41. ImplicationsTRADE
Corporate body : positive situation where benefit is
higher than disadvantage
Before GST : SST where are quite variety and sometime
make confusion because need to pay more than one
type of tax.
In GST : Reduce cost of locally manufactured goods and
services and increase copetitiveness in international
market and give boost to Malaysian exports.
Price of Malaysian exports on the foreign market are
lower. Will raises the demand for exports, which puts
upward pressure on the exchange rate, and also raises
import levels.
Reduce corporate sector average tax burden. Reduce
production costs and make exporters more competitive
Before GST : Manufacturing sector is highly taxed sectors
in Malaysia. Complex and high taxation structure has the
tendency to render products uncompetitive in the
international market
In GST : Have ability to eliminate complexities in the
present taxation structure

42. ImplicationsTRADE
All businesses are
authorized to claim
input tax credits once
they are registered.
Individuals on the
other hand are not
privileged to claim
input tax credits. In
international trade,
imports are taxable
whereas exports are
exempt.
As a trader the 6%
they pay when they
buy is input tax. And
the 6% they charge
when they sell is
output tax. Output
tax minus input tax is
what they remit to
Malaysian Customs.
Positive aspect of
implementation of
GST is that it is aimed
at equitable division
of tax burden
between the
manufacturing and
services.

43. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

44. Summary
 GST is s consumption tax on
goods and services. You want
the goods or services thus
you bear the 6% (standard
rate supply)
 GST is effective and efficient
 GST supposedly lower the
price of certain products
 GST is the easiest taxes
system
 GST are transparent and fair

45. IMPLICATIONS
CONCLUSION
INTRODUCTION
RECOMMENDATION
INDUSTRY
TRADE
LIVING STANDARDS
OVERVIEW OF GST
SUMMARY
RECOMMENDATION

46. Recommendation

48. Out of a population of about 28 million in
Malaysia, slightly more than 12 million make
up the labour force, whom 6.4 million are
registered as individual taxpayers.
Unfortunately, only 1.8 million are paying
income tax. As well in the business community
as well 508,150 registered companies that are
supposed to pay tax but only 107,043 actually
make the tax payment (Ministry of Finance,
2013). As per table below shows, taxes
collected from individuals and companies
accounted for 25.7% of Malaysia’s total
revenue.
Income Tax Issues

49. Why there is 10% service tax on top of GST 6% that already been charged ?
A service tax is a form of tax collected
by the service provider on behalf
of the government.
A service charge, on the other hand,
is a fee charged by the service provider
for delivering services.
For example, a restaurant may impose
a 10 per cent service charge for serving
consumers food and beverages ordered by the latter

50. • to cover the labour costs of service providers such as those in the hotel
industry and restaurants
• 90 per cent out of the collected sum will then be distributed to the
employees as part of their wages, in addition to their basic salary (eg;
service point)
• is vital to maintain the livelihood of the workers
• service providers chose to pay a fixed sum to their employees to meet the
requirements of the MWO 2012 while maintaining the collection of service
charges to offset labour costs at the same time.
• However, it must be noted that consumers are in a difficult position to
know whether there is in fact a collective agreement made between the
service provider and its employees
• purpose of the service charge is for the benefit of the employees
• the service charge must be restricted through the formulation of new
policies (law, rules and regulations) by the government
• Putrajaya call, in order for consumers to be relieved of the burden of paying
the service charge in light of the implementation of GST

51. Customers at restaurants and hotels will continue to pay the 10% service
charge despite the government having previously stated that the
implementation of 6% GST would replace the combined government tax
and service charge of 15%.
Putrajaya announced on 22 April 2015that
businesses such as hotels and restaurants, can
continue to collect the 10% service charge
from consumers, ending confusion as to
whether the fee was still allowed after the
implementation of goods and services tax
(GST).
REASON;
made to protect the workers in the
industry.

52. Price on Menu
Original Price RM 10
GST 6% RM0.60
Rm10.60
Should
Display on
Menu
At the counter
Original Price RM 10
GST 6% RM0.60
Service Charge 10% RM 1
Add: 6 % on Serv Charge RM 0.06
RM11.66
Customer
need to
pay