Gst Effect on Smes

GST Effect on SMEs

The initial rate for GST is expected to be 4 percent and the new tax system is scheduled to be implemented by the middle of 2011. GST will replace the present sales and services tax (SST) which ranges from 5 percent to 10 percent. A sum of RM222 million has been allocated as initial cost to ensure the smooth and effective implementation of the Goods and Services Tax (GST) system in Malaysia. The allocation will cover the cost of developing the GST computerisation system at RM139 million and the additional operations cost of RM83 million for the agency implementing the system, Malaysian Customs Department. The maintenance cost each year is estimated at RM8.5 million The plan to introduce GST has attracted a great deal attention from the economists, NGOs, politicians, businesses and the consumers. The attention it received was overwhelming and the critics spared no leniency in attacking the move by the government. It is understood that, as in other nations applying the GST, that the immediate effect will be a sudden instantaneous inflation with all goods and services going up in prices. The worse affected will be the consumers with the Small and Medium Enterprises (SMEs) likely to be adversely affected as well in their operations and the demand for their products. The government has since moved to quell the negativity surrounding the proposed tax system, will the Second Finance Minister saying that the GST implementation would be a win-win situation for all, as the Government would receive an additional RM1bil in revenue for the first year while the business and export sectors would save RM4.1bil and RM1.4bil, respectively. Besides, the government is proposing GST at a rate lower than the current sales and services tax rates, and to allow certain exemptions from GST, especially on essential goods such as rice, vegetables, basic food (rice, sugar, flour, and cooking oil), fish, meat and chicken, to ensure it will not burden the public, especially...