Goods and Services Tax Case
Goods and Services Tax (GST) or better known as value added tax (VAT) in many countries will be implemented in April 2015 to replace the current single-stage Sales Tax Act 1972 and Service Tax Act 1975 (SST). Unlike the existing sales tax and service tax, GST is a broad based consumption tax that generally charged on the consumption of goods and services at each stage of the supply chain including imported goods and services. This multi-stage GST system has already been practised in more than 160 countries across the world including countries like Indonesia and India. (Malaysia GST, 2014) Therefore, Malaysia is not venturing into some new territory as feared by some. Implementations of GST would be necessary for developing country like Malaysia because it could generate more revenue for the country and at the same time this would eliminate the inherent weaknesses, which exists in the current SST system.
The implementation of GST to replace the current consumption tax is part of the governments tax reform programme. Firstly, the country will be able to generate a more stable income or revenue every year following the implementation of GST in year 2015. Malaysians government is also expected to collect RM23.1 billion in GST for time period of April to December in 2015 and RM32 billion for the whole year of 2016. (NST, 2013) Besides that, Malaysia would also be able to trim down the fiscal deficit from 4% of GDP in year 2013 to 3.5% of GDP in 2014. (The Star Online, 2013) It is crucial that a country to curb its budget deficit because each year’s deficit will adds to a country’s sovereign debt which cost the government a huge sum of money to pay the high interest rate on the debt. Therefore, federal government is committed to implement GST to ensure that the country achieves its aim of having a balanced budget by 2020 besides strengthening the performance of Malaysia’s economy for the good of people. Impact of a financial crisis on the country, if