The Goods and Services Tax (GST), which will replace the Sales and Services Tax (SST), could have positive impact on businesses, the government and consumers, says a senior tax consultant.

Senior Manager of Ernst & Young Tax Consultants Sdn Bhd Yeoh Cheng Guan said the standard rate of GST is expected to be as low as four per cent, a lower rate as compared with the current SST, which was at 10 per cent and five per cent, respectively.

"The potential benefits to Malaysian consumers with the introduction of a broad-based and lower-rate GST would be a possible reduction in the cost of certain commodities that are currently subject to either sales tax or service tax at a higher rate," he told a seminar on Accounting for GST.

Yeoh said application of the GST was based on consumption in Malaysia, i.e. most goods and services supplied in Malaysia are taxed, imports are taxed, while exports are relieved from GST through the zero-rating mechanism.

"Liability for GST on standard-rated taxable supplies rests with the supplier, therefore suppliers need to ensure they collect the GST from their customers," he said.

GST should not burden businesses

"Eventhough GST is a tax to be borne by end-consumers, it is also important to note that GST is incurred based on one's affordability.

"For instance, if a person decides to dine in a fancy restaurant or buy a branded product from a boutique, he should be able to afford the GST that will be levied on these taxable supplies," he said.

Under the GST regime, an input tax credit mechanism is available for businesses, he said.

Yeoh said registered businesses making standard-rated supplies (subject to GST) or zero-rated supplies (e.g. exports - subject to the tax at zero per cent) are entitled to offset their GST liability (output tax) on standard rate supplies made (if any) with the GST incurred on inputs (input tax).

"This should ensure that in most instances, the GST should not be a cost to business, unlike the current SST regime," he said.

Yeoh said the GST will benefit the government in terms of a broad-based method of tax collection as compared to the current SST which is restricted to a more limited range of taxable items.

The Government, which first announced its intention to implement the GST in 2004, has indicated that the tax system could be introduced in the second half of next year.

- Bernama