The Goods and services tax (GST), also known as a value added tax isn’t something that’s easily avoided in any financial market. If you’ve never dealt with a value added tax before, I will attempt to explain how the tax works.
Let’s say you find a vein of crude oil on your property. An oil derrick is put into place and the oil in pulled from that vein. Once that product is pulled out of the earth it gets taxed. Now that oil is sent to a refinery and split into kerosene, gasoline, propane, diesel, natural gas, tar, oil and petroleum jelly. So every time one of those products changes, the government taxes it. So let’s say you purchase scented petroleum jelly. When it went from crude oil to petroleum jelly it got taxed. And when it went from regular petroleum jelly to scented petroleum jelly, that same product gets taxed again.
Now imagine that you pick up a cast iron skillet for your home. By the time you purchase that skillet, the fair market value of that skillet might be ten times higher than what you may have originally paid, due to the GST or value added tax. Every time “value” is added to a product to change what that product does or is, the government is going to tax it. So from raw iron ore, to molten iron, to a rod of iron, to pressed and melded iron, to a stamped cast iron skillet, to the market shelf; your skillet has been taxed at least 6 times. And you the consumer bare the brunt of those taxes when you pay for a product at the register.
So how does the average consumer handle the switch from a Sales and Service Tax to a GST or VAT tax? Preparation is absolutely vital. For the average Malaysian, you need to prepare now for prices to drastically climb. Everything from toilet paper and toothpaste, to sugar and bread is going to see a significant rise in price. If you’re able to purchase some non-perishable goods now, then you should do so. Things like canned goods, toiletry items, personal hygiene products, items for your home or vehicle. Those items that will sit comfortably on a shelf for the next 12-14 months before the VAT tax becomes the new standard.
As April 1, 2015 approaches, you will start to see the transitional shift from your regular Sales and Services Tax, to the newly implemented GST or VAT tax. This may mean that prices will steadily climb during the next year, or it may mean that they will skyrocket over night. It will depend on how the government handles the switch.
One thing is for sure though, the prices you pay now for your goods and services will seem like 5 or 10 cent compared to the multiples of 100 cent you’ll be paying not too far in the future. So planning and preparation are going to be your best weapons against the coming VAT tax.
Definitely BR1M 2015 won’t help much in fighting the GST
If you’re a business owner, you’re going to want to do some pretty extensive research on how this new GST tax is going to effect your profit margin. And with the implementation of the Anti-Profiteering Act, it may be even more imperative for you to do so now, before all the changes come in 2015.
Surviving Goods and Services Tax in Malaysia
But the government of Malaysia seem had stat to do some publication work to tell the people that the coming GST isn’t that scary and terrible to face. Instead it has advantages for the nation’s economy in long run. Know more about GST Malaysia on the official site.