4% GST expected to come into effect in middle of 2011

KUALA LUMPUR: The 4% Goods and Services Tax (GST) is expected to be implemented by the middle of 2011.

The GST Bill was tabled for the first reading in Parliament by Finance Minister II Datuk Seri Ahmad Husni Hanadzlah yesterday.

He told the house that the second reading of the Bill was scheduled for March next year.

Speaking to reporters at the Parliament lobby later, Husni said 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.

“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 padi, vegetables, basic food (rice, sugar, flour, cooking oil), fish, meat and chicken, to ensure it will not burden the rakyat, especially the lower income group.

“The main purpose for introducing GST is to make the current taxation system more comprehensive, efficient, effective, transparent and business friendly. The sales and services tax will be abolished and replaced with GST,” he said.

The current sales and services tax is from 5% to 10%.

“Based on the proposed model, businesses are expected to benefit in terms of lower cost of doing business.

“GST will be able to reduce bureaucratic practices in the management and administration of the country’s tax system, and overcome various inherent weaknesses that exist in the sales and services tax.”

He said companies with a revenue of RM500,000 and below would be exempted from GST, and also, about 70% of SMEs would be exempted.

Husni said the Government had done a comprehensive study on the GST.

“Under the sales and services tax system, the burden on the poor is 2.38%, but under the GST, it will be 2.17%.

“For the higher income group, their tax burden will be reduced from 3.13% to 2.74%,” he added.

“The overall savings for households will be between RM14.52 and RM346.92 yearly. On all grounds, we will benefit more from the GST,” he said.