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Get to know more about the goods & services tax (GST) implementation in Malaysia

GST: Goods and Services Tax or Government Service Tax?

Recently, the Daily Express reported that Labuan has already implemented the goods and services tax (GST). The news portal noted, despite assurances that the duty-free island will be exempted from GST, 6% is already being “quietly incorporated into the billing” for the airport parking lot.

When articles such as these surface, it shows that many Malaysians are still not aware of the current tax system in effect – the Sales and Services tax system. Many are unaware that they are already being charged service tax at 6% and sales tax at either 5% or 10%, and have been paying for this tax since the 1970s. Many are also unaware that the Goods and Services Tax proposed by PM Najib, which will only be implemented in April 2015, completely replaces the current Sales and Services tax system.

Goods and Services Tax – the real GST – will effectively be levied at 6% for consumption of goods and services; instead of a combination of Government Service Tax at 6% and sales tax at either 5% or 10%. A good example is a receipt shown below:

  • The cost of purchase: RM 16.00
  • Subsequently, there is a service charge of 10% and 6% “Government Service Tax”
  • Total paid by consumer: RM18.55

 GST receipt

Many Malaysians are still very much unaware that the Goods and Services Tax will only be implemented next year (1 April 2015). Without knowing this, many people are jumping the gun and assuming the GST found in current receipts stands for Goods and Services Tax.

In fact, with the implementation of Goods and Services Tax the total amount paid by consumers in theory is:

  • The cost of purchase: RM 16.00
  • Goods and Services Tax at 6%: RM 0.96
  • Total paid by consumer: RM16.96

This demonstrates the need for factual education by industry leaders surrounding the new taxation system.

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