GST – Minister Given Enormous Power Again

As a member of the Pakatan Task Force on Anti-GST, I write in response to the letter that appears in Views of the The Star, Thursday, 24th December 2009. The anonymous Tax Accountant from Malacca indeed said it all about the current acrimonious debate on the GST when he entitled his letter as “We don’t need the GST to boost revenue”.

In what I thought was a well argued submission, (apart from the usual ranting on leakages etc though) but not privy to the Bill, he first wanted a clarification on whether the GST will replace the entire current taxation on purchases of goods and services imposed by the government, which inter-alia, include the Sales and Services Tax (SST).

In the explanatory statement of the Bill, it is clearly stated that the GST replaces the Sales Tax Act 1972 and the Services Tax Act 1975. No where in the Bill does it mention that it subsumes or replaces the Custom and Excise Duties. Businesses that are taxable include any trade, commerce, profession, vocation, or any other similar activity, whether or not for pecuniary profit. 

The Bill also clarifies that, unlike the present sales tax which is a single stage tax, the GST is a multi-stage tax, ie. payment of tax is made in stages by the intermediaries in the production and distribution process.

GST shall cover all sectors of the industry and is a tax on final consumption of goods and services. It is also collected through an elaborate credit system where the GST incurred on inputs is offset against GST charged on outputs.

In simpler term, input tax is tax charged on taxable goods and services to a taxable person on imported goods. Output tax means any tax charged on good and services in the course of furtherance of his business in Malaysia. A taxable person is either a person registered under the Act or is liable to be registered under the Act.