by Donplaypuks® at http://donplaypuks.blogspot.com
Every now and then, when politicians, economists and their financial con-sultants, together with the Roti Jala's and their clueless laboratory driven and manufactured drivers run out of ideas on how to manage a sinking economy, they will pull out from their collective tattered hats what they will label as 'Our Saviour.'
If PM Najib, his Government of Thieves and cronies, sycophantic and desperate followers and supporters are to be believed, the proposed Goods and Services Tax (GST) will catapult Malaysia soon (it's just round the corner/over them there hills) into first world status.
Believe me, nothing of that kind will transpire. Not with this plan and this government.
In 1978 when I was in London, the GST (VAT or Value Added Tax) rate in UK was 15%. Today, it hovers close to 20%. Has it saved UK? The UK's budget deficit runs at some £
By contrast, Malaysia's Debt:GDP ratio is about 55%. We have virtually zero unemployment, while inflation is below 3%. Yet, Fitch gave a warning to Malaysia about the sustainability of its future income stream, thereby panicking Najib and BUMNO/SCUMNO/DUMBNO into prematurely introducing GST. You may well ask why the double standards practised by these so-called western "watchdogs." Suffice to say they have a clear, suspicious agenda.
The real problem lies in the fact that despite democracy and "free and fair" elections, WE, THE PEOPLE, have NOT been able to force politicians and governments from over-borrowing, over-spending and keeping to a strict regime of a balanced budget. And when you keep giving more and more money to thieving governments, what else can you expect but an explosion of daylight robbery by Prime Ministers, Ministers and their cronies and supporters? It's not just a Malaysian problem, but a universal one. If we reduce it to a family problem, no matter how much the head of a family is able to increase his income by, can that person stop a financial disaster and eventual bankruptcy if he has an incurable drinking or drug abuse and addiction problem?
So, giving Najib the 6% GST and an additional RM24 billion a year will not save us from an economic slide that will parallel those faced by Greece, Portugal, Ireland and Spain. If anything, it will hasten it. In five short years, Najib has increased his office budget alone by over 300% or to nearly RM17 billion, with huge billion ringgit allocations under vaguely worded headings, suspected to be slush funds. This means that the Taxpayer is probably being fraudulently walloped for party political expenses passed off as legitimate government expenditure. Najib is asking you and me to tighten our belts, while he is spending like there's no tomorrow! Najib is the most profligate prime minister we have ever had, and he has an incurable addiction to wantonly spending the Rakyat's (citizen's) money. After every financial year, Najib has plundered our coffers to cover supplementary expenditure of billions of ringgit of overspending by Ministries and state governments.
130 countries have a GST tax regime? And how many of these are like USA, UK, Japan and Europe, kept afloat by printing, printing, printing money and floating and re-floating bonds and Debt, which even their grandchildren's generation will not be in a position to permanently retire, or even make a serious dent in reducing significantly? Now, that snake oil salesman Najib has embarked on this game too, as though floating Islamic bonds in Abu Dhabi or Samurai Bonds in Japan will miraculously save us. Who does he surround himself with? Why, it's that same posse of con-sultants from USA and UK who, having failed to halt the slide in their own countries, are offering us the same failed strategies and snake oil!
So, GST alone will not save us from looming financial disaster if continually fuelled by gross mismanagement by the Prime Minister and his office.
Be that as it may, let's prepare for what seems inevitable. Here are are some simple matters to note for GST:
1. Only GST registered businesses may charge and collect GST. Charities and government organisations will be exempt from GST. Inter-company transactions may be exempt from GST.
2. GST collection, enforcement and refunds are usually managed by the Customs & Excise Department (C&E) in most countries.
3. The Government will probably introduce a minimum turnover threshold for GST registration. e.g RM500,000.
4. GST will replace sales and service tax. Exports are exempt from GST. All imports are subject to GST. The Government has not clarified if import duties will be revoked or revised downwards to take into account 6% GST.
5. GST on sales is called Output Tax.
6. GST on expenses is called Input Tax.
7. GST registered businesses are allowed to deduct the Input Tax from the Output Tax, and remit only the net to the C&E. This will probably be done via a GST return to be submitted to the C&E on a quarterly basis. Where Input Tax exceeds Output Tax, the business will be entitled to a refund.
8.Thus, contrary to silly claims made by some uninformed BUMNO bloggers, there is no compounding factor in GST resulting in 19% cumulative price increase to the final consumer. One GST registered business' Output Tax will become the Input and deductible/claimable Tax of another GST registered entity.
9. For non-GST registered businesses, GST will be treated as an expense in its Profit & Loss Account. (See example 2 below). So, smaller businesses are more likely to raise prices than bigger ones.
10. GST CANNOT be claimed as an expense from the C&E by the final consumer i.e. mostly, this refers to individuals like you and me.
11. For GST registered businesses, GST WILL NOT be an expenses. They will become mere collecting agents for the C&E, and the liability or refund will be reflected in the Balance Sheet of the business as a creditor or debtor. (See example 1 below).
12. Therefore, for registered businesses, there is no compelling reason to raise prices, other than to pass on the increase in administration costs arising from GST compliance.
13. So, for businesses that have turnover below the RM500,000 threshold, it will still benefit them to register for GST. Otherwise, they will have to raise prices to cover the cost of Input Tax on its expenses.
14. Upon introduction of GST, there will be a one-off rise in inflation rate. When 3% GST was introduced in the early '90's in Singapore, inflation jumped to 6% and its took a few months to peter off.
15. Remember, that regardless of collection, GST registered businesses will have to remit the Output Tax on their sales invoices (after netting off Input Tax). You may not be able to off-set GST on bad debts unless it follows the Income Tax rules for write-offs. So, there may be a cash flow problem. Businesses may have to postpone sales invoicing at the end of the last month of a quarter to the following month, for better cash management!
16. The Income Tax Department will be able to check your business turover disclosed in the P&L with that shown in the GST Returns.. So, it will be virtually impossible for a business to fiddle its turnover/sales.
17. In UK and Europe, GST is not charged for take-away from food outlets, since it is deemed that no service is rendered. GST is of course charged when you have a meal at any food outlet or restaurant. The situation in Malaysia is not clear as the government is still in the process of determining what expense will be exempted, zero-rated or be GST chargeable.
I am sure you will have many queries on the GST regime. Email me and I will see if I can provide satisfactory answers.
| EXAMPLE 1: GST for GST Registered Businesses | ||||||
| XYZ SALES INVOICE REGISTER | ||||||
| Date | Invoice No. | Customer | Sales | GST @ 6% | Total | |
| 15.07.14 | SI156 | ABC S/B | 500.00 | 30.00 | 530.00 | |
| 15.08.14 | SI157 | EFG S/B | 700.00 | 42.00 | 742.00 | |
| 15.09.14 | SI158 | HIJ S/B | 800.00 | 48.00 | 848.00 | |
| TOTAL | 2,000.00 | 120.00 | 2,120.00 | |||
| XYZ EXPENSE INVOICE REGISTER | ||||||
| Date | Invoice No. | Supplier | Cost | GST @ 6% | Total | |
| 01.07.14 | 123 | Mfg. S/B | Stock Purchases | 100.00 | 6.00 | 106.00 |
| 01.08.14 | 345 | Mfg. S/B | Stock Purchases | 200.00 | 12.00 | 212.00 |
| 01.09.14 | 456 | Mfg. S/B | Stock Purchases | 300.00 | 18.00 | 318.00 |
| 600.00 | 36.00 | 636.00 | ||||
| 01.07.14 | 789 | FF S/B | Office Furniture | 200.00 | 12.00 | 212.00 |
| 02.07.14 | 145 | Env S/B | Stationery | 50.00 | 3.00 | 53.00 |
| 15.09.14 | 333 | Mom & Co | Tea/Coffee | 15.00 | - | 15.00 |
| 22.09.14 | 667 | Emv S/B | Medicine | 25.00 | - | 25.00 |
| 25.09.14 | 269 | Raja & Co. | Legal Expenses | 500.00 | 30.00 | 530.00 |
| 790.00 | 45.00 | 835.00 | ||||
| TOTAL | 1,390.00 | 81.00 | 1,471.00 | |||
| 1. | XYZ GST RETURN FOR THE QUARTER ENDED 30TH SEPTEMBER 2014 | |||||
| OUTPUT TAX | 120.00 | |||||
| INPUT TAX | (81.00) | |||||
| NET GST PAYABLE TO C&E | 39.00 | |||||
| SALES SUBJECT TO GST | 2,000.00 | |||||
| TOTAL NET EXPENSES | 1,390.00 | |||||
| LESS: EXEMPT/ZERO RATED EXPENSES | (40.00) | |||||
| EXPENSES SUBJECT TO GST | 1,350.00 | |||||
| 2. | XYZ P&L FOR THE QUARTER ENDED 30TH SEPTEMBER 2014 | |||||
| Sales | 2,000.00 | |||||
| Cost of Sales | (600.00) | |||||
| Gross Profit | 1,400.00 | |||||
| Administration Expenses | ||||||
| Legal | 500.00 | |||||
| Medical | 25.00 | |||||
| Office Refreshments | 15.00 | |||||
| Office Stationery | 50.00 | |||||
| 590.00 | ||||||
| Net Profit Before Tax | 810.00 | |||||
| 3. | XYZ BALANCE SHEET FOR THE QUARTER ENDED 30TH SEPTEMBER 2014 | |||||
| Fixed Assets | 200.00 | |||||
| Current Assets: Bank a/c | 749.00 | |||||
| Current Liabilities: GST Payable | (39.00) | |||||
| 910.00 | ||||||
| Share Capital | 100.00 | |||||
| P&L Account | 810.00 | |||||
| 910.00 | ||||||
| EXAMPLE 2: GST for Non- GST Registered Businesses | ||||||
| 123 SALES INVOICE REGISTER | ||||||
| Date | Invoice No. | Customer | Sales | GST @ 6% | Total | |
| 15.07.14 | SI156 | ABC S/B | 500.00 | - | 500.00 | |
| 15.08.14 | SI157 | EFG S/B | 700.00 | - | 700.00 | |
| 15.09.14 | SI158 | HIJ S/B | 800.00 | - | 800.00 | |
| 2,000.00 | - | 2,000.00 | ||||
| XYZ EXPENSE INVOICE REGISTER | ||||||
| Date | Invoice No. | Supplier | Cost | GST @ 6% | Total | |
| 01.07.14 | 123 | Mfg. S/B | Stock Purchases | 100.00 | 6.00 | 106.00 |
| 01.08.14 | 345 | Mfg. S/B | Stock Purchases | 200.00 | 12.00 | 212.00 |
| 01.09.14 | 456 | Mfg. S/B | Stock Purchases | 300.00 | 18.00 | 318.00 |
| 600.00 | 36.00 | 636.00 | ||||
| 01.07.14 | 789 | FF S/B | Office Furniture | 200.00 | 12.00 | 212.00 |
| 02.07.14 | 145 | Env S/B | Stationery | 50.00 | 3.00 | 53.00 |
| 15.09.14 | 333 | Mom & Co | Tea/Coffee | 15.00 | - | 15.00 |
| 22.09.14 | 667 | Emv S/B | Medicine | 25.00 | - | 25.00 |
| 25.09.14 | 269 | Raja & Co. | Legal Expenses | 500.00 | 30.00 | 530.00 |
| 790.00 | 45.00 | 835.00 | ||||
| 1,390.00 | 81.00 | 1,471.00 | ||||
| NB: NO GST RETURN IS REQUIRED TO BE SUBMITTED TO C&E | ||||||
| 1. | XYZ P&L FOR THE QUARTER ENDED 30TH SEPTEMBER 2014 | |||||
| Sales | 2,000.00 | |||||
| Cost of Sales | (600.00) | |||||
| Gross Profit | 1,400.00 | |||||
| Administration Expenses | ||||||
| Legal | 500.00 | |||||
| Medical | 25.00 | |||||
| Office Refreshments | 15.00 | |||||
| Office Stationery | 50.00 | |||||
| GST | 81.00 | |||||
| 671.00 | ||||||
| Net Profit Before Tax | 729.00 | |||||
| 2. | XYZ BALANCE SHEET FOR THE QUARTER ENDED 30TH SEPTEMBER 2014 | |||||
| Fixed Assets | 200.00 | |||||
| Current Assets: Bank a/c | 629.00 | |||||
| 829.00 | ||||||
| Share Capital | 100.00 | |||||
| P&L Account | 729.00 | |||||
| 829.00 | ||||||
