MALAYSIA: GOODS AND SERVICES TAX FROM MID-2011

KUALA LUMPUR, Dec 16 (Bernama) -- The Malaysian government intends to
implement the goods and services tax of four per cent in the middle of 2011,
Second Finance Minister Ahmad Husni Hanadzlah said Wednesday.

This would give all parties 18 months to get ready for the implementation,
he told reporters at the lobby of Parliament House after he had tabled the Goods
and Services Tax Bill 2009 for first reading in the House of Representatives.

The bill seeks to provide for the imposition and collection of goods and
services tax and related matters. The GST will replace the sale tax and the
service tax currently imposed and collected under the Sales Tax Act 1972 and the
Service Tax Act 1975.

The GST is a broad-based consumption tax based on a value-added concept.
Unlike the present sales tax, which is a single stage tax, the GST is a
multi-stage tax. Payment of tax is made in stages by the intermediaries in the
production and distribution process.

The tax itself is not a cost to the intermediaries and does not appear as an
expense item in their financial statements.


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

Ahmad Husni said the GST, which was a more efficient tax system in terms of
cost effectiveness, would replace the current consumption tax in the form of
sales tax and service tax.

With the implementation of the GST, the government would garner revenue of
RM13 billion for the first year compared to the current RM12 billion
(US$1=RM3.42), he said.

He also said that businesses would save RM4.1 billion in taxes while the
export sectors would save RM1.4 billion.

"The main purpose for the government to introduce the GST is to make the
current taxation system more comprehensive, efficient, effective, transparent
and business friendly," he said.


He said that based on the proposed model, businesses were expected to
benefit in terms of lower cost of doing business as the GST was not a cost to
business.

"The government is proposing to impose the GST at a rate which is lower than
the sales tax and service tax rates and to allow certain exemptions from the
GST, especially on essential goods such as agricultural products (padi and
vegetables), basic foods (rice, sugar, flour, cooking oil), fish, meat and
chicken so as to ensure that it will not burden the people at large, especially
the poor and the lower income group," he said.

Furthermore, the GST would be more able to reduce bureaucratic practices in
the management and administration of the country's tax system and to overcome
the various inherent weaknesses that existed in the sales and service tax, he
added.

Ahmad Husni also noted that companies with revenue of RM500,000 and below
would be exempted from imposing the GST and about 70 per cent of small and
medium sized industries (SMEs) would also be exempted.

The second and subsequent readings of the bill would be done during the
sitting of the Dewan Rakyat next year, scheduled for March.

He said this was to give the opportunity for everyone to scrutinise the bill
to provide feedback.

-- BERNAMA