Budget 2014: Pay less tax in Goods and Services Tax (GST)?It was announced by our Prime Minister that 300,000 individuals who are earning a monthly income of RM4,000 will no longer need to pay any income tax in 2015, following the implementation of GST in 2015.

Are you going to pay less tax after the introduction of Goods & Services Tax (GST) on 1 April 2015?

The answer is obviously NO! You will surely be paying more TAX when GST is imposed! 


Before GST

Let’s take an example, individuals with monthly income of RM3,000 do not need to pay any income tax. However, he may need to pay service tax for foods & drinks ordered & consumed at McDonalds or Starbuck, etc.

Amount spent on foods & drinks with Service tax = RM900 per month (RM30 x 30 days)

Service tax = RM54 (6% on RM900)


After GST

Individuals with monthly income of RM3,000 do not need to pay any income tax but now he has to pay for everything that subject to GST, assuming he continue eat & drink at McDonalds or Starbuck, etc and never eat foods & drinks at “Gerai makan”.

GST = RM3,000 x 6% =RM180.

Additional tax = RM126! (180-54)


Conclusion:

Government is expecting additional income of RM30,000,000,000 (RM30 billion or 30,000 million) from the Malaysia people after the introduction of GST.

Government income = people’s tax.

Let’s guess, who will pay more tax?

14 COMMENTS

  1. Berapa GST yang Saya kena bayar? Saya sekarang bergaji RM2,200, perlukah saya report income tax?

  2. Why did you calculate the GST based on the income? Tax will imposed based on the product or service(in RM)you use. Therefore, tax that you will incur when you eat at McDonald will be the same before and after implementation of GST. You will save from paying service tax.

    Example, when you go have meal at Sushi King, currently you have to pay sales tax 6% and service tax 10%. Your total meal is RM 100, sales tax : 6% x 70 = 6, service tax: 10% x 100 = 10. Total payment is RM116.

    With GST, you will be only imposed with 6%. here you will only be paying RM106.

    Well, of course GST covers wider product/services lah.. and Fadzi, you income is RM2200 per month, no need to report income tax. Individual income tax is not the same as GST.

    • Hi Anne, thank you for your reply.

      Let me clarify one thing before further illustrate why i use income in calculating GST.

      Meal at Sushi King will be charged the following:

      Foods cost
      6% Service Tax (Some named it Government Tax)
      10% Service Charges

      The service charge are collected to be distributed among the staff.

      You may visit here for more details: http://www.nbc.com.my/blog/are-you-paying-service-charge-or-service-tax/

      My assumption on that person is as follows:

      Staying with family (no need to bear any cost)
      Entertainment (include telephone, unifi) = RM800
      Foods & beverages = RM900
      Car instalment, petrol, parking, toll = RM1,300

      (All monies will be used up without any saving and you will need pay GST for car & loan interest from banks.)

      Unless you cook yourself & buy all meats & vegetables from wet market, then those essential foods will be exempted from GST.

      I am not sure if GST will be charged for vegetable bought from Jusco.

  3. May I ask?

    Why can’t we take the same example of RM900 before the GST implemented and would only bear RM54 a month for the McDonald’s and Starbucks? Wasn’t it cheaper tax after the implementation of GST?? And wasn’t it cheaper as the tax implemented only GST tax and no more service charges?? (Or still??) Can you please clarify on this?

    • No, Misliana, GST apply to mostly every goods and services, not only on particular items, say McDonalds.

      Even though the house price may not subject to GST, how about the construction costs?

      The developers have to pay GST for all construction works and building materials used. Are the developers going to absorb the extra GST? The answer is obviously NO. The developers will incorporate the GST paid for construction works & building materials into the house selling price, making the house price even higher.

      For your information, service charge is not service tax and it is nothing to do with the Government. Please refer below for more details about service charge:

      http://www.nbc.com.my/blog/are-you-paying-service-charge-or-service-tax/

  4. Can you clarify how come there is GST on Car Loan interest? Is this charged by the Bank or from the Car Company?

    How about existing home loans where the house is still under construction, (bought in March 2014- before the implementation of GST)hence need to pay the loan interest until end of 2015, does that mean in April 2015 onward, the loan interest is subjected to 6%? If yes, is this imposed by the developer or the bank?

  5. I don’t think one is paying more necessarily after GST. The current tax system is the Sales and Services Tax (SST). The sales tax is imposed on most goods at the import or manufacturing stage, generally at 5% or 10%. The Services tax is at 6%. The old “manufacturing” biz-to-biz tax will be changed to 6%, consistent with all other stages of sale. Also, the overall effect is hard to say as small businesses with annual turnover less than RM500000 are not required to charge GST. Therefore it’ll probably not affect low income earners if they are not looking to buy a Prada every month. If you look at it and use it in a positive way, fresh vege and meat from the market will not be GST-ed hence one can find a way not only to save money, and also be healthier (than sipping a sugar- and caffeine-filled Starbucks).

    That said, costs other than the tax may increase due to additional work that is to be done with filing or implementing a new system nationwide, in addition to accounting or booking effort.

    Wrt buying residential houses and developers may charge GST – that’s not true as taxes have already been charged under the old SST system. Prices of building materials have already included taxes all this while.

  6. You really need to check your facts bro…
    When you do comparison, do A with A…not A and A-Z… :)

  7. HI angelina. i understand what you are saying. but to me this GST should be calculate based on the goods and services and not from our income. however if you want to based on our income this is my opinion. first if you want to say that the developer want to increase the overall price they dont need the gst implementation if they want to increase the price. however, i see this trends that the price affects to the market because it shows that Malaysia is on the market efficiency that affected to any of the issue out there. so when the gst is not to be implement those entrepreneurs would benefit the loophole of avoiding tax at the moment. for example without gst the developer income is greater at the moment because they can play in one thousand and one ways in avoiding tax. but with gst hardly they can avoid that. so basically it closes up the gap between the rich and the people that live in the poverty. while current way of taxation is only focusing one sided that leads to the entrepreneurs can exploit the market like arbitrage that actually leads to inefficient market that leads to the inflation and leads to the our currency devalue and increasing in our huge gap of surplus balance of payments and eventually leads to the Malaysia having financial crisis. so in my point of view i see this GST is essential to our country.

  8. Okay,let me get this straight, before GST a person spends in Starbucks or McDonalds,
    *RM900 with a Service Charge of 6% = RM54

    then
    with GST, this same person spends in Starbucks or McDonalds,
    RM3000 with GST at 6% = RM180

    ??????????????huh?????????? Questions!!!!

    1. Why is this person suddenly spending RM3000 at Starbucks or McDonalds??? Has this person gone insane???

    2. Shouldn’t the comparison be that if before GST this person is spending RM900 in Starbucks or McDonalds, this person would still spend RM900 in the same place when GST is implemented; hence;
    RM900 x Service Tax 6% = RM54
    RM900 x GST at 6% = RM54…

    No change there… I really don’t get your calculation of RM900 and RM3000…

      • Tan, for personal, not at all. For business, more works to do, no benefits also.

        Supposed the Government should take our money for better welfare give out to the people, but it seems it does not happen.

LEAVE A REPLY

Please solve the math to comment. Thank you. * Time limit is exhausted. Please reload CAPTCHA.