The Advantages & Disadvantages of GST in Malaysia
The Goods and Services Tax (GST) has been in effect for a while now in Malaysia. The GST is basically a form of taxation system imposed by the government where there is a single tax in the economy that is placed upon goods and services offered. The purpose of the GST is mean to create a single, overall taxation system in the entire country for all the goods and services which are offered in the county. But how effective is GST anyway?
The Advantages of GST
First, let’s take a look at the good things that the GST has brought forth since its inception in Malaysia:
- GST can help the diversification of income sources for the government, instead of just relying on income tax and petroleum tax alone.
- For retailers, GST will not be a cost incurred, which means that there will be no hidden taxes. The overall cost of doing business because of this, as a result becomes lower, which will in turn help the export sector be more competitive.
- GST is also a transparent form of taxation, and reduces the number of indirect taxes incurred.
- GST allows businesses to show the tax applied directly in the sales invoice itself. Customers know exactly how much tax they are paying for the product or service they are purchasing.
- Under GST, the tax burden no longer falls on the shoulders of just one party and instead is divided equally between the manufacturing and services sector.
- Both the Central GST and State GST will now be charged on the manufacturing cost and will only be collected at the point of sale under this GST regulation. This benefits the people because prices will be reduced which in turn helps companies when consumption is increased because of this.
- Doing business in Malaysia is now easier without the various hidden taxation costs, thanks to GST.
The Disadvantages of GST
There’s always pros and cons to everything, and GST is no exception to this rule. Some of the disadvantages that GST brings with it include:
- A negative impact on the real estate market, according to critics that is. Why? Because GST would add up to 8% of the cost of new homes, which will reduce demand among consumers since home prices are already pricey as it is.
- The main argument that has been circulating around GST is that the cost of goods increase and as a result, it becomes a burden to the public when they have to pay higher prices for goods and services.
- Market demand would decrease when the price of goods and services are increased, and those who argue against the GST claim that many people would not have the ability to pay for the high cost of living which is not equally matched by their income needs.
- Because GST is a form of broad-based tax, it will impact the majority of Malaysians who are not taxpayers right now.
- There are concerns that the rate of GST could possibly increase in the future to increase revenue for the government.