About GST In Malaysia………………………………………………………3
Statement of Problem
Goods and Services Tax (GST) had been introduced by the Yang Amat Berhormat
Dato’ Seri Haji Mohd Najib bin Tun Haji Abd Razak during Budget 2014 on 25th
October 2013 and it has been enforced since 1st April 2015 to
replace the old tax system, Sales and Services Tax (SST). It has been outlined
by the government that GST tax system will overcome the weaknesses of SST tax
system and will reduce the burden of the society. Lately, most of the Small
Medium Enterprise (SME’s) seems dissatisfied with the implementation of GST tax
system by the government. This is because SME’s experienced that GST tax system
does not conform with the purposes of the changes as stated by the government.
For this report, we had done face-to-face interview with SME’s around Sungai
Petani to find out the SME’s understanding, perceptions, challenges and
problems, recommendations and hopes regarding GST tax system. We also want to
identify the SME’s experiences in dealing with Royal Customs Malaysian Department (RCMD) regarding GST tax
CURRENT SITUATION ABOUT GST IN MALAYSIA
According to the Economic Report 2017/18, a total of 454,609
business entities have registered under the GST whereby the bulk of the
registrants are in wholesale, retail trade, repair of motor vehicles. The
motorcycle vehicle sector accounted for 34.2 per cent of the total, followed by
construction (17.7 per cent) and manufacturing (12.4 per cent) sectors. For
this year, the federal government expects to collect RM41.5 billion in Goods
and Services Tax (GST) this year, 0.7 per cent higher than last year’s RM41.21
The report also highlighted that from April 2015 to July 2017,
14,578 tax evasion offences were identified and 2,097 cases were prosecuted
with 928 slapped with penalties.
Since the six per cent GST implementation on 1st April
2015, there had been several adjustments for the good of the economy. Back in April 2015, 553 types of goods and
services were zero-rated while another 25 were exempted from GST. Fast forward
to this year, 2017, services that are further exempted from GST are those extended
to overseas customers for exported goods, services supplied to overseas clients
at Free Trade Zones including Licensed Manufacturing Warehouses and also
expenses on tools and machinery used in manufacturing.
Royal Malaysian Customs Department introduced GST Electronic
Information System on 1st July 20017 in order to strengthen the enforcement of
GST compliance. This pilot project involves 1,000 business entities whereby a
device is installed at every point of sale to capture and transmit real time information
back to RMCD.
For Budget 2018, The Prime Minister, Datuk Seri Najib Tun Razak,
has proposed that all reading materials, including magazines, comics, journals
and periodical publications will be zero-rated from Jan 1, 2018. Furthermore,
the government is also proposing for GST exemption on the import of equipment
related to the oil and gas industry, under a leasing agreement, supplied by
companies located at designated locations (Labuan, Langkawi and Tioman).
The Finance Ministry maintained that the GST is a necessity as it
enhances efficiency of the country’s tax system and widens the tax base.
Recently, Deputy Minister of Finance, Datuk Othman Aziz, emphasized that the
government does not plan to increase the GST tariff from six percent in the future.
He said the main focus of the government now is to improve the GST compliance
rate in the country.
STATEMENT OF PROBLEM/ISSUE
The Royal Malaysian Customs Department (RMCD) found that certain
companies and small businesses were still facing problems, especially in
declaring the correct GST-03 statements. Some businesses and traders still
facing the issue of filing and documentation. To overcome this issue, the
Customs Department’s personnel will take on the role of ‘GST Ambassadors’
effective Oct 15 to help businesses with their Goods and Services Tax (GST)
claims, by providing free advice to them.
Meanwhile in East Malaysia, RMCD facing a problem where almost
90,000 GST statements have yet to be received from companies and industries in
Sabah. There are 24,610 registered GST payers in Sabah. However, as of October
2017, RMCD have yet to receive 89,791 GST statements.
Based on statistics as of June this year (2017), RMCD has issued
62,000 notices to companies that have failed to meet the requirements, for
instance incomplete form and incorrect declaration. As of today, only 10,000 of
the 62,000 have made corrections. Thus, effective January 2018, those who fail
to submit their complete GST claims will be fined under GST Act 2014.
RMCD has issued 37,556 compounds for various GST-related offences
from April 1, 2015, to Feb 17, 2017. The compounds were issued for failure to
display prices inclusive of GST, failure to submit the returns statement and
payment, tax invoices and registration-related offences. In the country, Johor
recorded highest number of compounds with 8,104 followed by Kuala Lumpur
(5,036) and Selangor (4,707).
To enquire the SMEs’ understanding about
To identify the perceptions of SMEs towards
To find out their experiences in dealing
with Royal Customs Malaysian Department (RCMD).
To identify their challenges and problems
in dealing with GST.
To enquire their hope from GST.
To find out how to improve the process of
We collected our data by making a
face-to-face interview with all the SMEs in our list which is Faizah Textile
Sdn. Bhd., Butik Siti Khadijah, Foo Seng Trading, SP Mega Home, Sri Maju and
Suria Jerai Electrical Sdn. Bhd. All of these interviewees’ premises are
located at Lagenda Heights, Sungai Petani.
We use this method in collecting the data
because it allows us for more in-depth data collection and comprehensive
understanding. It means that if we did not understand what our interviewee is talking,
we can directly ask them for more explanations. Furthermore, the interview
session can be considerably longer since our interviewee has a greater
commitment to participate in the interview. The commitment can be seen as they
are willingly to have a face-to-face session with us.
In implementing this method, we went to
their premises and give an introduction of ourselves before we ask them
questions about our assignment. We recorded the videos of the interviews so
that we could refer to the video in completing our report. Anyone of our group
member will ask them question one by one. It means we will ask them another
question after they have answered the question before. One person will record
in the notebook on what our interviewee answered instead of recording a video.
After the interview session has end, we took a photo of our interviewee as our evidences
in the report.
The first respondent is Tay Chye Hoo,
male, 60 years old. He studies until Sijil Rendah Pelajaran (SRP) before he
opened up his own business. Mr Tay’s company, Foo Seng Trading is a Small
Medium Enterprise (SME) which sells second-grade clothes that comprise of male,
female and children attire. In the interview, he states that GST has been a
burden to his business. He feels that the inclusion of 6% GST has been more of
a problem rather than a solution. Regarding dealing with Royal Customs
Malaysian Department (RCMD), Mr Tay says he does not have any problems dealing
with the RCMD and the process is easy and convenient. He later explain his
business had suffered since GST has been introduced. The cost of buying gets
higher and he has to sell the clothes at a price higher than before. This reduces
his monthly sales and he often gets negative feedbacks from his customers. At
the end of the interview, Mr Tay states that he hopes the GST can be redueced
if not abolished.
The second respondent is Amirah
binti Abdul Ghani, female, 28 years old. She is the manager for Siti
Khadijah, Sungai Petani branch. Siti Khadijah is a Small Medium Enterprise
(SME) that sells exclusive Islamic clothes and prayer veil. The interview went
smoothly as she has the general knowledge about GST. In the interview, her perception
towards GST is not very positive. She feels that the GST is a burden and causes
the price of goods to be higher and more expensive. Miss Amirah also states
that, not everyone is able to pay the Goods and Services Tax (GST), even the
implementation of GST is for the higher income earners. Sometimes, the middle
income earners need to buy goods /things that also includes GST, so more or
less they will also be affected by the GST. Moving on to the dealing with Royal
Customs Malaysian Department (RCMD), Miss Amirah explains that it is quite
difficult process as we have to know the inflow and outflow of our business
transaction. It is not very convenient based on her point of view. When asked
about whether the GST should be continued or stop, she says that she does not
have any issues if the GST is to be carried on. Just that, she wants the
Government to improve the system. By the end of the interview, she hopes that
the GST system can be improved, and the government should divide between the
high, middle and low-income earner in order to improve the system.
The third respondent, Ng Wan Ying, female,
27 years old. She is a holder of Bachelor of Accountancy from Universiti Utara
Malaysia. Miss Ng currently works as an accountant at Sri Maju Sdn Bhd. Sri Maju
Sdn Bhd is Small Medium Enterprise that sells stationaries. During the
interview, she gives her fair view and honest opinion regarding the Goods and
Services Tax (GST). As for her perception, she clearly states that the GST is a
burden, be it to the owner of the business, or for the customers. She feels
that the 6% rate of the GST is quite high for everyone to bear. Miss Ng also
said, she does not see any benefits from the introduction of the GST. When
asked about the process in dealing with the Royal Customs Malaysian Department
(RCMD), she said the process is simple, convenient and user-friendly. The
challenges and problems dealing with the GST is that, the price of the goods
increases and so does the cost of living. It has become a burden for the societies.
Lastly, Miss Ng also gave her hope regarding the GST. She hopes that the GST
rate can be reduced, or even better, just stop the implementation of the GST.
We very much enjoyed our dialogue with our fourth respondent. He is
very intelligent and understanding gentleman, Mohd Faris bin Zulkifli.
Although he is only 18 years old, his knowledge on the current issues amazed
us. He currently helps his family business, Faizah Textile a Small Medium
Enterprise (SME) in selling clothes made from “batik” while waiting for his
application result to enter university. When the former student of Sekolah
Menegah Sains in Kepala Batas was asked about his Sijil Pelajaran Malaysia
(SPM) result, he simply replied “not bad”. Mohd Faris states that it is
difficult to give opinion about Goods and Services Tax (GST) tax system because
he needs time to understand the system itself. In answering questions regarding
the Royal Customs Malaysian Department (RCMD), he
pleased that the body is approachable and there is no problem in making
payments as the procedures is similar to all tax payments in Malaysia. He also
added that the process is simple and very convenient. Regarding GST, so far, he
was clearly upset about the implementation of GST tax system in Malaysia. He
explains that it is not worth for a business to give a part or 6% of their
business’s profit when there are no benefits in return because the amount given
to the government can be used for other purposes in improving the business. In anger tone, he said that the effort they
exert in making profits is not worth when there are no benefits outlines by the
government for business implementing GST tax system. He hopes that the
regulatory body or the government can outline the GST tax system’s benefits as
references and if not, he thinks that the system should be put to an end.
When we are interviewing with our fifth respondent, Miss Eunise
Goh, it was one of those interviews that you struggle to get her response.
She is very kind to receive our interview although it is an inappropriate time
as she is closing the shop’s account for the day. She
is an accountant for SP Mega Home, a Small Medium Enterprise (SME) in trading goods
to the public in relatively small quantities for use or consumption also known
as retail. She refused to answer any personal questions as it is not related to
the Goods and Services Tax (GST) tax system. Miss Eunise Goh thinks that GST
tax system is a burden for the small business like them. From time to time, the
system reduces the consumer buying power as the price of goods and services
increases. It is hard to get her attention during the interview and all the
questions asked is replied by “We only follow the rules.”. For questions
relating to the Royal Customs Malaysian Department
(RCMD), she said that the government already provides the guidelines and we
just need to follow them. She added that it is easy if we follow the rules set
by the government. Regarding the problems and challenges experienced so far in
implementing GST tax system, she said that the business experienced no benefits
from GST tax system as mentioned by the government. The business can recover
some of GST tax payment made but it is not enough to show that there is benefits
to earn from implementing the system. She also said that the remuneration or
salary level in Malaysia is low compared to the cost of living that arise
day-by-day. She hopes that the current percentage of 6% GST system can be lower
or even better the tax system could be stop.
The last respondent, Ros Affandy is a great guy. He is
easygoing and a very bright person. He seems energetic although he just came
out from a meeting with his clients. His interview was a bit slow to start, as
he is so thoughtful and seemingly bright, yet as things got rolling, he was
very open minded. He is the accountant for Suria Jerai Electrical Sdn Bhd, a
Small Medium Enterprise (SME) in selling electrical goods and he is the one
responsible to register the business with GST tax system. He is in his early
thirties and is a graduate from University Putra Malaysia in Master in
Taxation. Ros Affandy thinks that Sales and Services Tax (SST) is a better
system and more user-friendly compared to the new Goods and Services Tax (GST) tax
system. He said that the new tax system gives more burden to the low-income
earners compared to the high-income earners. He added that high-income earners
have excess money to cover their additional GST expenses but low-income earners
only have sufficient money to survive for the month in high tone. Regarding
questions related to Royal Customs Malaysian Department (RCMD), he said that
the regulatory body is approachable and always open for public to ask any
questions relating to the tax system. The registration procedures and the tax
declaration are easy to understand and convenient. For the challenges and
procedures, he said that the tax is already implemented for couple of years but
there is information asymmetry between the government and the public regarding
the tax system. The public still do not understand about the GST tax system and
there is no appropriate action taken by the government to resolve this matter.
He also said that Inland Revenue Board (IRB) should monitor the business around
the country regularly because most business put ridiculously high price for
their goods and blame the rising oil price and do not reduce the price of their
goods when the oil price has dropped. He claimed that the most essentials goods
already subject to GST increases the cost of living and there is no hope for
the GST tax system. He hopes that the government will put a stop to GST tax
system and return to the old SST tax system.
As a conclusion, the implementation of
Goods and Services Tax (GST) since 1st April 2015 has been a burden
to the societies. This is based on our interview that all of our respondents
said that, the GST has been nothing but a burden since its implementation.
Since the implementation of the GST, the societies had suffered a lot because
of the increasing price of the goods and the burdening lifestyles they have to
encounter. We also receive some recommendations from the respondents. As an
example, one of the respondents suggest that the government should revise and
differentiate the GST tax system based on the total income of the societies.
Furthermore, one of the respondents also said that, the Government should
outline what is the benefits of GST because he claimed that he does not see any
benefits the GST brings to the societies. As for the next respondents, they
said that, they want the Government to stop the GST and bring back the Sales
and Services Tax (SST). They would
prefer the GST to be stopped. If not, the reducing of the GST rates are
welcomed with an open arm.
“2018 Budget: GST a
Bold and Proven Move by Government.” NST Online, New Straits Time, 27 Oct.
from GST in 2017.” NST Online, New Straits Time, 27 Oct. 2017, www.nst.com.my/business/2017/10/295658/rm415b-collected-gst-2017.
Chie, Kow Gah. “GST
Tak Naik Walaupun Selepas PRU, Kata Timb Menteri.” Malaysiakini, 29 Nov. 2017, www.malaysiakini.com/news/403733.
Mohamed. “Customs Personnel to Play Role of GST Ambassadors; Aid and Educate
Traders, Businesses.” NST Online, New Straits Time, 3 Oct. 2017, www.nst.com.my/news/nation/2017/10/287047/customs-personnel-play-role-gst-ambassadors-aid-and-educate-traders
Zam Yusa. “Sabah
Waiting on Almost 90,000 GST Statements.” Free Malaysia Today, New Straits
Time, 11 Dec. 2017, www.freemalaysiatoday.com/category/nation/2017/12/11/sabah-waiting-on-almost-90000-gst-statements/.
“Customs Dept Issues
37,556 GST-Related Compounds.” The Star Online, Star Media Group, 8 Mar. 2017, www.freemalaysiatoday.com/category/nation/2017/12/11/sabah-waiting-on-almost-90000-gst-statements/.