Effect of GST on the Malaysian economy

Since the GST was implemented in Malaysia on April 2015, it gives some effects towards our economy .
1. GST is imposed on all goods and services produced in the country including imports causing price to
increase.
There are some goods that are exempted from GST (as Zero-Rated Supply & Exempt Supply.) such as certain basic
foodstuff like rice, sugar, flour, cooking oil, fish and essential services. However, some other goods are not
exempted from GST and causing the increase of price be paid by consumer.
2. Increase the cost of living and decreasing standard of living
The Establishment Post on 21 July 2015 posted an article on the effect of GST where a recent survey by online
recruitment company JobStreet.com shows that nine in 10 working Malaysians are finding it hard to deal with the
hike in cost of living, especially after the Goods and Services Tax (GST) was implemented in April. Salaries have
not been rising as fast as cost of living which causes some Malaysian facing some difficulties to support themselves.
The minimum wage in Malaysia is RM 900 however the median monthly household income in Malaysia was RM4,
585 (2014 research by statistics Department). High cost of living will leads to decreasing standard of living.
3. Change in consumption pattern.
Consumers have to decide on which goods or services to buy and GST is only incurred when the goods or services
are consumed. They may divert more of their expenses towards essential goods and services rather than on luxury
goods
4. Increase in Gross Domestic Product
The gross domestic product (GDP) measures of national income and output for a given country's economy.
Implementation of GST helps to increasing profitability in business, which subsequently helps GDP and investment
growth.
5. GST reduce numbers of indirect taxes.
With GST implemented a business premises can show the tax applied in the sales invoice. Customer will know
exactly how much tax they are paying on the product they bought or services they consumed. As one could imagine,
due to the way SST works, we as consumers often find ourselves unwittingly paying double taxes first at the
manufacturing stage, and later at the service stage. The GST, which is set to replace the SST, is a transparent tax
system that will ultimately benefit the consumers. One of its greatest benefits is the elimination of the possibility of
paying double taxes, because the two-pronged tax rates and policies in the SST system would have been replaced
by one single GST.

6. Result in inflation
The term "inflation" refers to rising prices of essentials such as wheat, milk, meat, clothing, medical
services, coffee, electricity, etc.
Implementation of GST since April 2015 had contributed towards the growth of inflation.

Source : Inflation Rate in Malaysia is reported by the Department of Statistics Malaysia.

http://www.tradingeconomics.com/malaysia/inflation-cpi

Based on the graph, we could observed that from April 2015, the rate of inflation in Malaysia had increased
month by month. From 1.8% in April to 2.6% in September. The factor that had cause the growth of the inflation
rate in Malaysia is mostly by GST. Inflation can lead to major effect of inflation which is the damage it can do to the
pocketbooks of average workers. Wages and salaries can lag cost of living increases, making families struggle to
keep up as the price of everything increase.
Under the GST, developers will now have to bear additional tax costs for materials and services

Based on the Sales Tax Act of 1972, basic building materials such as bricks, cement and floor tiles fall inside First
Schedule Goods, in which all the goods in this category will not be subjected to sales tax. Meanwhile, other building
materials fall inside Second Schedule Goods, in which all the goods in this category will only be charged sales tax
of

Read more: Cost of living in Malaysia squeezing Malaysians http://www.establishmentpost.com/cost-living-inmalaysia-squeezing-malaysians/#ixzz3rC1xoxhM