What is GST ?

GST is a tax applicability based on the concept of value added. It is imposed on goods and
services at each stage of production and distribution in the supply chain including imported goods
and services. According to (Nizam yatim, 2015), GST levied on the supply of goods import and
services in Malaysia. Applicable tax will be applicable at every stage of the supply from
manufacturers, wholesalers, retailers and consumers.

This GST history begins with a tax system introduced in France in 1954 CA. (Hasmukh N.
Shah, 2017). Through this GST, there are many countries implementing this system including
Malaysia. Malaysia has implemented the GST in 2015, which is April 1. The main purpose of GST
implementation in Malaysia is to overcome the weaknesses in sales tax and services in the country
causing the tax system to overlap.

The main purpose of the Government Malaysia to implement the Gst is an integral part of
the reform programmed of the system of national taxation as Government measures to increase the
capacity, effectiveness and transparency in the management of taxes. At the same time, the
Government is also implementing the GST to offset the impact of the people and consumers so
that people are not exaggerated, especially the low income. Therefore, to charge GST at the rate
of the lower expected users will benefit from it because most goods and services are experiencing
a price reduction.

In addition, the Gst this every trader is obliged to register for the GST and is obliged to
alert the scope of taxation and the law prescribed. And sufficient conditions for traders but avoid
registered will be at risk for face fines and legal action by the Government.

Finally, GST also existing applicability wbe replaced by sales tax and service tax. GST
difference with the existing use of the tax system is only in terms of the scope of the imposition of
wider tax, stage production and distribution as well as can claim tax credits on the GST paid on
business inputs. This means that the sales tax is only charged on a stage production in which the
goods will beremoved from the factory or imported. While on the other hand, service tax imposed
on specific services are provided at levels it to the user.
The Effectiveness Of GST

Benefit

GST is a more comprehensive, effective, transparent, efficient and business-friendly tax

system. Through the implementation of the GST, there are weaknesses that can be overcome in
the existing consumer tax system. Among the significant shortcomings that can be over such as
overlapping tax effects, double tax and tiered taxes, and leakage issues resulting from price transfer
activities and so on. Through GST it is also expected to increase tax compliance and easier to
administer as its management system is based on self-policing method. At the same time, the
merchants only need to submit a simple tax return according to the format provided, while all
records and documents relating to the relevant transaction need only be kept at the premises of the
company to be audited by the GST auditor at a later date.

Furthermore, GST also benefit for the traders. When export duty is abolished through the
implementation of this GST it can encourage companies to market their products overseas. The
benefits earned by the merchant is to reduce the cost of the business when the sales tax previously
unpaid. Therefore, through this GST, traders can reclaim the tax with the Customs Department In
the king of Malaysia.

In addition, GST can increase the country's revenue stream. The central government is
expected to generate more revenue with the implementation of the GST. These increased
government revenues can be used for people's development and wellbeing expenses. More and
more poor people can be helped. The GST also allows the government to reduce corporate and
income taxes. It can encourage investment and can drive economic growth in a competitive global
environment. As economic growth increases, employment increases and revenue increases.
Therefore, GST is a good, efficient and fair tax system as everyone pays taxes based on usage
Disadvantages

However. The GST also has a disastrous impact on the people. Through the implementation
of this GST, it will result in increased prices of goods in the market. This is because although the
tax rate is lower and many basic goods and needs are tax-exempt, the GST scope is greater because
it involves a lot of trading activities. For example the cost of producing a tool such as machines,
packing materials, electricity and everything else will be charged GST. As a result, traders are
forced to raise prices to cover the increase in costs due to the GST even though it involves the
production of basic goods. (Dr. Mohd Nazari Ismail, 2014)

Furthermore, the disadvantages of GST it may cause the price increase continuously.
According to Singh (2007) the introduction of the GST could lead to an increase in cost of living
leading to high inflation. For example, goods in the market will continue to increase and at the
same time the demand from the people will also increased. The effect is that production exceeds
demand in the local market and inflation of goods is also taking place.

Finally, the GST also has a profound effect on the people, especially the poor. This is
because, rising market prices have caused the people not being able to buy goods especially for
luxury goods. This situation also causes people's living costs to decline. For example, there are
many miserable low-income groups who are unable to cope with their basic needs because of their
high cost of living. As a result, there is an increase in the poor in the country.

Overall, this GST system has a positive and negative impact. Gst has been deemed effective
in national development as it can increase government revenue. However, its implementation
requires a system designed as without a comprehensive GST system will be achieved. However,
the GST also has a bad impact on the people, especially the poor because of the increase in the
prices of goods causing these people to be impressed. Therefore, Malaysia must achieve a high-
income status first because raising the tax rate without increasing the income of the people is just
a burden on the people. At the same time, the government also has to postpone the implementation
and review of GST's initial rate as it will definitely burden consumers. Finally, the Government
should focus on the rising cost of living and introduce special measures to help low- and middle-
income earners reduce the adverse effects of GST on them.
Refrences

CA. Hasmukh N. Shah, 2017. GST- Introduction, Definitions, Concept of Supply, Composition
Levy and Transitional Provisions. Retrieved 5 May 2018.
From https://www.wirc-icai.org/material/GST-WIRC-Revised-1.pdf

Dr. Mohd Nazari Ismail,2014. The effectiveness of GST.

Retrieved 10 May 2018. From
https://www.facebook.com/notes/ikram-johor/kesan-gst-kepada-kos-kehidupan-rakyat-
malaysia/679451828743978/

Nizam yatim 2015. The Benefit of Gst.

Retrieved 5 May 2018. Fromhttp://www.utusan.com.my/rencana/gst-berfaedah-kepada
peniaga-1.129323