ACKNOWLEDGEMENTS

Alhamdulillah, we managed to complete this Engineering Economy (JGB20502) case study assignment on time. In performing our assignment, we had to take the help and guideline of some respected persons, who deserve our greatest gratitude. The completion of this assignment gives us much pleasure.Special thanks to Mr Musa Muhammad Ali, our lecturer for this subject for giving us a good guideline for this report throughout numerous consultations. We would also like to expand our deepest gratitude to all those who have directly and indirectly guided us in writing this visit report.Many people, especially our classmates and team members itself, have made valuable comment and suggestions which gave us an inspiration to improve our assignment. We thank all the people for their help directly and indirectly to complete our assignment.

INTRODUCTION

This chapter considers a subject at the very center of public finance analysis, thedistortions introduced (and corrected) by taxation. Tax-induced reductions in economicefficiency are known as deadweight losses or the excess burdens of taxation, the latter signifying the added cost to taxpayers and society of raising revenue through taxes that distort economic decisions. Taxes almost invariably have excess burdens because tax obligations are functions of individual behavior. The alternative, pure lump-sum taxes, are attractive from an efficiency perspective, but are of limited usefulness precisely because they do not vary with indicators of ability to pay, such as income or consumption, that are functions of taxpayer decisions. Thus, even though tax analysis often starts with the simple case of a representative household, it is household heterogeneity and the inability fully to observe individual differences that justify the restrictions commonly imposed on the set of tax instruments. Designing an optimal tax system means keeping tax distortions to a minimum, subject to restrictions introduced by the need to raise revenue and maintain an equitable tax burden.

DEFINITION OF TAXATION

The system of compulsory contributions levied by a government or other qualified body on people, corporations and property in order to fund public expenditures. Taxation refers to the practice of a government collecting money from its citizens to pay for public services. Without taxation, there would be no public libraries or parks. One of the most frequently debated political topics is taxation. Taxation is the practice of collecting taxes (money) from citizens based on their earnings and property. The money raised from taxation supports the government and allows it to fund police and courts, have a military, build and maintain roads, along with many other services. Taxation is the price of being a citizen, though politicians and citizens often argue about how much taxation is too little or too much.

TYPE OF TAXATION

Atax(from theLatin taxo means rate) is a financial charge or other levy imposed upon a taxpayer (an individual orlegal entity) by astate or the functional equivalent of a state to fund various public expenditures. A failure to pay, or evasion of or resistance to taxation, is usually punishable by law. Taxes are also imposed by manyadministrative divisions. Taxes consist ofdirectorindirect taxesand may be paid in money or as its labour equivalent.

DIRECT TAXES

A tax that is paid directly by an individual or organization to the imposing entity. A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets. This main sources of income liable to Income Tax is: Gains or profits from any trade, business, profession or vacation. Employment income. Dividends, interest or discounts. Rents, royalties or premium. Pensions, annuities or other periodical payments. Gains or profits not falling under any of the above.

Tax that been categorized as direct tax is:

COMPANY TAXA company, whether resident or not, is assessable on income accrued in or derived from Malaysia. Income derived from sources outside Malaysia and remitted by a resident company is not subject to tax, except in the case of banking and insurance business and sea and air transport undertakings. A company is considered a resident in Malaysia if the control and management of its affairs are exercised in Malaysia. Places of control and management are considered on the basis of where meetings of the Board of Directors are held. A tax rate of 28% is applicable to both resident and non-resident companies. In the case of a company carrying on petroleum production, the applicable tax rate is 38%.

PERSONAL INCOME TAXAll individuals are liable to tax on income accrued in, derived from or remitted to Malaysia. The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country (as stipulated under Section 7 in the Income Tax Act 1967). Generally, an individual becomes a tax resident for a year of assessment if the aggregate number of days he stays in Malaysia during the basis year is not less than 182 days (in certain circumstances, an individual may be a tax resident even if the total number of days of stay is less than 182 days).

Personal ReliefNo.Individual Relief TypesAmount (RM)

1Self and Dependent

Special relief of RM2, 000 will be given to tax payers earning on income of up to RM8, 000 per month (aggregate income of up to RM96, 000 annually).This relief is applicable for Year Assessment 2013 only.9,000

2Medical expenses for parents5,000 (Limited)

3Basic supporting equipment5,000 (Limited)

4Disabled Individual6,000

5Education Fees (Individual)5,000 (Limited)

6Medical expenses for serious diseases5,000 (Limited)

7Complete medical examination500 (Limited)

8Purchase of books, journals, magazines and publications1,000 (Limited)

9Purchase of personal computer (once in every 3 years)3,000 (Limited)

10Net saving in SSPN's scheme3,000 (Limited)

11Net saving in SSPN's scheme (with effect from year assessment 2012 until year assessment 2017)6,000 (Limited)

12Purchase of sport equipment for sport activities300 (Limited)

13Subscription fees for broadband registered in the name of the individual (with effect from year of assessment 2010 - 2012)500 (Limited)

14Interest expended to finance purchase of residential property. Relief of up to RM10, 000 a year for three consecutive years from the first year the interest is paid.Subject to the following conditions:(i) The taxpayer is a Malaysian citizen and a resident;(ii) limited to one residential unit;(iii) the sale and purchase agreement is signed between 10th March 2009and 31st December 2010; and(iv) the residential property is not rented out.Where:(a) 2 or more individuals are eligible to claim relief for the same property ; and(b) total interest expended by those individuals exceeds the allowable amount for that year. Each individual is allowed an amount of relief for each year based on the following formula: A xBCwhere; A = total interest allowable in the relevant year; B = total interest expended by the relevant individual in the relevant year; C = total interest expended by all the individuals.10,000 (Limited)

15Husband/Wife/Alimony Payments3,000 (Limited)

16Disable Wife/Husband3,500

17Ordinary Child relief1,000

18Each unmarried child of 18 years and above who is receiving full-time education ("A-Level", certificate, matriculation or preparatory courses).1,000

19Each unmarried child of 18 years and above that: (i) receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/preparatory courses).(ii) Receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate).(iii) The instruction and educational establishment shall be approved by the relevant government authority.6000(with effect from year of assessment 2013)

20Disabled child

Additional exemption of RM4,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authoritiesWith effect from year of assessment 2013 additional exemption is RM6,0005,000

21Life insurance dan EPF6,000 (Limited)

22Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1,000 can be claimed together with life insurance premium) - deleted from year assessment 2012 until year assessment 20211,000 (Limited)

23Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 20213,000 (Limited)

24Insurance premium for education or medical benefit3,000 (Limited)

A married woman whose income is separately assessed generally has her overall tax liability reduced, although this may not always be the case. The separate assessment covers all her income sources. She may, however, elect for joint assessment, in which case, the husband is given a wife relief of RM 3,000.

Allowable Deduction from Aggregate IncomeNoContributionNotes

1Gift of money to the Government, State Government or Local Authorities.Subsection 44(6)

2Gift of money to Approved Institutions or Organisations.(Amount is limited to 7% of aggregate income)Subsection 44(6)

3Gift of money or cost of contribution in kind for any Approved Sports Activity or Sports Body.(Amount is limited to 7% of aggregate income)Subsection 44(11B)

4Gift of money or cost of contribution in kind for any Approved Project of National Interest Approved by Ministry of Finance.(Amount is limited to 7% of aggregate income)Subsection 44(11C)

5Gift of artifacts, manuscripts or paintings.Subsection 44(6A)

6Gift of money for provision of Library Facilities or to Libraries.Subsection 44(8)

7Gift of money or contribution in kind for the provision of facilities in Public Places for the benefit of disabled persons.Subsection 44(9)

8Gift of money or medical equipment to any healthcare facility approved by the Ministry of Health.Subsection 44(10)

9Gift of paintings to the National Art Gallery or any State Art Gallery.Subsection 44(11)

Income Tax Rebates for Resident Individual with Chargeable Income Less Than RM 35,000No.Tax RebateYear Of Assessment 2001 - 2008Year Of Assessment 2009 Onwards

(RM)(RM)

aSeparate AssessmentWifeHusband-350350-400400

bCombined AssessmentWifeHusband-350350-400400

Total700800

bAssessment Where Husband Or Wife Does Not Has Any Total IncomeWifeHusband-350350-400400

Total700800

Other Tax RebatesNo.Tax Rebate(RM)

aZakat/FitrahSubject to the maximum of tax charged

bFees/Levy on Foreign Workers ( deleted from year assessment 2011 )Subject to the maximum of tax charged

INDIRECT TAXES

A tax that increases the price of good so that consumers are actually paying the tax by paying more for the products. An indirect tax is most often thought of as a tax that is shifted from one taxpayer to another, by way of an increase in the price of good, Fuel, liquor and cigarette taxes are all considered examples of indirect taxes, as many argue that the tax is actually paid by the end consumer, by way of a higher retail price.

SALES TAXThis is an ad valorem stage tax imposed at the import and manufacturing levels. Manufacturers are required to be licensed under the Sales Tax Act 1972. Manufacturers whose annual sales turnover do not exceed RM100, 000 are exempted from licensing. These companies are taxed based on their inputs. However, to alleviate the burden of small manufacturers from sales tax upfront on their inputs, these companies can opt to be licensed under the Sales Tax Act 1972 in order to purchase tax-free inputs. With this option, manufacturers will only have to pay sales tax on their finished products.

The general rate for sales tax is 10%. However, raw materials for use in the manufacture of taxable goods are eligible for exemption from the tax. Inputs for selected non-taxable products are also exempted. Certain non-essential foodstuffs and building materials are taxed at 5% while cigarettes and liquor are taxed at 15%. Primary commodities, basic foodstuffs, basic building materials, certain agricultural implements and heavy machinery for use in the construction industry are exempted. Certain tourist and sports goods, books, newspaper and reading materials are also exempted.

SERVICE TAXThis tax is imposed on certain goods and services provided in certain prescribed establishments. The goods include food, drinks and tobacco, while the main services are provision for premises for meetings, conventions and cultural and fashion shows; health services, and professional and consultancy services provided by legal, engineering, surveyor, architectural, accounting, advertising and other consultancy firms and services provided by insurance companies, motor vehicles service and repair centres, telecommunication services, security and guard services, recreational clubs, estate agents, parking space services, courier service firms, dentist, veterinary doctors, provision of accommodation and food by private hospitals and credit cards companies. Currently, hotels having more than 25 rooms and restaurants within or outside hotels are subject to this tax. The tax base has been widened to include services provided by car rental agencies licensed under the Commercial Vehicles Licensing Board Act, 1987 and having an annual sales turnover of RM300, 000 and above; employment having an annual sales turnover of RM150, 000 and above; and companies providing management services including project management coordinating services having an annual sales turnover of RM300, 000 and above. Generally, the imposition of service tax is subject to a specific threshold based on annual turnover ranging from RM150, 000 to RM500, 000.

GOOD AND SERVICE TAX (GST)

GST also can be called as Value Added Tax. GST is levied on the supply of goods and services at each stages of the supply chain from the supplier up to the retail stage of the distribution. Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. Hence, it does not matter how many stages where a particular good and service goes through the supply chain because the input tax incurred at the previous stage is always deducted by the businesses at the next in supplychain. GST is a broad based consumption tax covering all sectors of the economy in example all goods and services made in Malaysia including imports except specific goods and services which are categorized under zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette. The basic fundamental of GST is its self-policing features which allow the businesses to claim their input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government's delivery system will be further enhanced.

CURRENT MALAYSIA TAX IMPLEMENTATION

Goods & Services Tax (GST)Goods & Services Tax (GST), which is also known as VAT or the Value Added Tax in many countries is a multi-stage consumption tax on goods and services. GST is levied on the supply of goods and services at each stages of the supply chain from the supplier up to the retail stage of the distribution. Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except specific goods and services which are categorized under zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette. The basic fundamental of GST is it's self-policing features which allow the businesses to claim their input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government's delivery system will be further enhanced.

GST is not a new thing. The concept behind GST was invented by a French tax official in the 1950s. In some countries it is known as VAT, or Value-Added Tax. Today, more than 160 nations, including the European Union and Asian countries such as Sri Lanka, Singapore and China practice this form of taxation. Roughly 90 percent of the world's population live in countries with VAT or GST. Here are some of the tax rates of countries around the world who have implemented GST or VAT ;

Goods & Services Tax (GST) Implementation in Malaysia

The proposed announced Malaysian GST Model will be in full force by 1st April 2015 to replace the current consumption taxes of the Sales Tax & Service Tax (SST) which has a 5% to 6% of the specific rate at various thresholds. Announced on 25th October 2013 by Malaysian Prime Minister Najib Razak, companies will be having a total of 17 months for preparation for the GST Implementation. Companies in Malaysia can begin to register for the GST on 1st October 2014 which is 6 months before the GST implementation date and will need to do so by 1st January 2015.

The proposed Malaysian GST standard rate is charged at 6% and the threshold for purpose of registration under GST is the annual sales value of RM 500,000 which makes almost an expected percentage of 80% of businesses being excluded for this GST Implementation.

The scope of the GST implementation will be charging companies on goods & services that are:

1) At all levels starting from production, manufacture, wholesale and retail;

2) Supplied within the country or imported into the country;

3) Supplies made by the Federal and State Government departments are not within the scope of GST except for some services prescribed by the Minister of Finance;

4) Supplies made by the local authorities and statutory bodies in relation to regulatory and enforcement functions are not within the scope of GST; and

5) GST charged on all business inputs such as capital assets and raw materials is known as input tax.

Do also note that:

1) GST charged on all supplies made (sales) is known as output tax.

2) For eligible businesses, the input tax incurred is fully recoverable from the Government through the input credit mechanism.

Business with zero rate supply can claim their inputs as credits which covers the following:

1) Food Item

2) Other goods (goods supplied to designated areas like Labuan, Langkawi and Tioman and supply of treated water to domestic consumers)

3) Services Supplied (directly benefits a person wholly in his business capacity and not in his private or personal capacity)

Businesses that have paid their inputs that cannot be claimed as credits includes:

1)Goods :

Land used for Residential Purposes Land used for Agricultural Purposes Land used for General Use Building used for Residential Purposes

2)Services :

Financial Education Childcare Healthcare Residential Land Building Agricultural Land General Use of Land Accommodation Transport Tolled Highway or Bridge Funeral Burial Cremation Supplies made by Societies and Similar Organizations

How does GST work in Malaysia?In the current tax regime, the 10% Sales Tax (on manufacturing and imports) and 6% Service Tax (on the F&B and professional services industry) is collected by one party (usually the seller) and passed on to the tax authorities.For example, in the previous 6% Service Tax regime, when you buy a cup of coffee from Starbucks that says RM15 on the menu, you pay RM15.90 (including the current Service Tax of 6%). Starbucks will keep RM15 and pass on RM0.90 to the tax authorities.In a GST regime (6% GST in this calculation), the following happens:1. Starbucks buys the coffee beans from the wholesaler to make your cup of coffee for RM10 (RM10+ 6% GST). The Wholesaler keeps RM10 and passes on RM0.60 from Starbucks to the tax authorities.2. You buy that cup of coffee from Starbucks which the beans were used to make, and pay RM15.90 (RM15 + 6% GST). Starbucks now keeps RM15 and passes on RM0.30 to the tax authorities (RM0.90 - RM0.60). The reason why Starbucks only passes RM0.30 to the tax authorities is because they have effectively already 'paid' RM0.60 in tax earlier on the first RM10, and only RM0.30 tax is left to be paid on the RM5 "value-add".We have graphically shown this example below ; GST vs. Current Sales and Services Tax

The only similarity between the GST and the current indirect tax regime is thatthe Royal Malaysian Customs Department (Customs) which isadministering the current sales and service tax regime will also beadministering the GST regime. Apart from this, the GST regime differs quitesubstantially compared to the sales and services tax regime.

a)Multi-Stage TaxIn contrast to the current sales and service tax regime, GST will be a broadbasedconsumption tax, based on a value-added concept. GST will be leviedand charged on all taxable supplies of goods and services made in the courseof a trade or business in Malaysia by a taxable person. The imposition of GSTon a multiple-stage basis is a key difference from the current sales tax andservice tax which is levied at only one stage of the supply chain.

b) Tax Neutral to BusinessesGST is a multi-stage tax payable by all the intermediaries in the productionand distribution chain, with the tax burden ultimately borne by the consumer.Unlike the sales and service tax regime, businesses which are registered forGST purpose, will be allowed to claim input tax credit (i.e. GST it has paid inthe course of business) to offset against the GST levied on the goods orservices supplied to its customers.

c) Broad-based TaxGST has a substantially broader reach compared to sales and service taxwhich is only levied on particular taxable goods and services. All supplies ofgoods and services will be subject to GST unless they are zero-rated suppliesor exempt supplies, or fall within particular special schemes.

d) Businesses Bear Compliance BurdenAs a key feature of the GST is the ability of business to offset GST paidagainst GST charged, businesses will bear a significant part of the complianceburden of implementing GST. Businesses will play the tax collector of GST,since ultimately the GST will be collected by businesses and remitted toCustoms after setting-off the correct amount of input tax credit. Strict rulesrelating to timing of charging and remitting GST as well as invoicingrequirements will need to be adhered to.

e) GST on Imported ServicesWhilst no sales or service tax is imposed on services provided by a foreignservice provider to Malaysian entities, under the GST, such imported serviceswill be subject to GST. The reverse charge mechanism is likely to be adoptedto ensure that the GST payable are accounted for by the recipient of the services.

Understanding GST Concept & Fundamental

How GST is charged at each level of supply chain - standard rated supply

Sales priceRM100,000Sales priceRM150,000Sales priceRM175,000

Assume manufacturer's GST for purchases is RM2,000Add GST 6%RM6,000Add GST 6%RM9,000Add GST 6%Not applicable

TotalRM106,000TotalRM159,000TotalRM175,000

Input tax creditRM2,000Input tax creditRM6,000Input tax creditcan't claim

GST remitRM4,000GST remitRM3,000Cost increasedRM9,000

(6,000-2000)(9,000-6000)Cost increasedN/A

Table 1.0 Implementation of GST in Malaysia You can't claim back for the RM9,000 of GST you paid to your wholesaler. You can't charge GST on consumer.

GST Mechanism - Standard Rated

Retailer (You) is not GST registered GST 6%

ADVANTAGES & DISADVANTAGES OF TAXATION IN MALAYSIA

Out of the total votes (1,213), 924 votes or 76% were disagreed with the implementation of GST, while 262 votes or 22% agreed with it. The e-poll results may not be a good representative of public feedback as it is only involved 1,213 votes or people perhaps.

E-poll results of public feedbacks about GST in Malaysia

Advantages of GST in Malaysia

Lower business costUnder the current system, some business pay multiple taxes and higher levels of tax-on-tax (cascading tax). With GST, businesses can benefit from recovering input tax on raw materials and incurred expenses, thus reducing costs.Increase global competitivenessPrices of Malaysia exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supplies chain. This will strengthen our export industry, helping the country progress even further.

Enhance complianceThe current SST has many inherent weaknesses making administration difficult. GST system has in-built mechanism to make the tax administration self-policy and therefore will enhance compliance.Reduces red tapeUnder the present SST, businesses must apply for approval to get tax-free materials and also for special exemption for capital goods. Under GST, this system is abolished as businesses can offset automatically the GST on inputs in their returns.EquityWith GST, taxes are leveled fairly among all the businesses involved, whether they are in the manufacturing, wholesaling, retailing or service sectors.Fair pricing to consumersGST eliminates double taxation under SST. Consumers will pay fairer prices for most goods and services compared to SST.Greater transparencyWith 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.

Government can manage the country more effectivelyWhich is obviously beneficial to both individual and the society as a whole. For example, the government can use the GST collected to build infrastructures such as hospitals and schools so that people get access to quality healthcare and education.

Disadvantages of GST in Malaysia

The increasing of cost of goodsThe main issues concerning about the implementation of GST is the costs of the goods will increase which will burden the people in the country. Although the government claim that the implementation of GST will not hurt the businesses and people as the tax paid on the inputs at the previous stage is claimable or deductible, overall the the cost of goods will still increase as the producers-pass the full value added to the end consumers at the final stage. May result in inflation as general products prices may go upConsequently, there might have inflation effect since the GST is applied to the prices of all goods, at every stages which result in inflation as the general products prices may go up and the hyperinflation might occur from the continuously of inflation.Affected the market demandThere might have continuously effect from the products prices go up. The demand of the market might substantially decrease due to the limited purchasing power of households. Many people argue against the GST is that the people would not have the ability to pay for it as the high cost of living can not be met by their current income needs and GST would unduly burden the low income working group. Due to the increased products prices and high cost of living, people may not willing to spend so much as their limited purchasing power and the market demand will substantially affected.

Might lead to higher debt level Moreover, some people is arguing that the GST should not be implemented as the introduction of GST might lead to higher debt level of the country as other countries occurs such as Greece and Italy. Therefore, GST has not helped in the development of the country and its would not help in reducing the country's debt level.

High rate of unemployment might occurAlthough the government claim that the GST would not hurt businesses due to GST claimable practice, in fact it will hurt the businesses too. This is because of the low demand in the market due to the high cost of product pass to the end consumers, the businesses have to decrease the supply to meet the current condition of lower demand, thus the businesses have to cut down the expenses such as labor cost due to the lower output needed and eventually there might occur high rate of unemployment. Besides, the businesses is not producing in the efficient conditions as they are not maximizing the usage of the machines, rental and etc and all these will lead them to downsize their businesses and eventually lead to the recessions in a country.

Increase the tax burden on low income working group (the other 85% as described item 3 above)In addition, GST is a new form of broad-based tax that will impact the majority of Malaysians who are not the taxpayers now. Although the government claims that the implementation of GST would not burden the people because the income tax rate is not increasing, in fact the GST is increasing the burden of Malaysians who are not the taxpayers now. This is because some people is not eligible to pay for income tax where their income is under certain amounts, so the broad based tax system-GST will impact on those low income workers who are not the taxpayers now as they will have to pay for GST when they consume and make purchases.The government may possibly increase the GST rate from 4% to 15% to increase revenueMany people is worrying the rate of GST may possibly increase in the future in order to increase for the government revenue. This is because many countries have increased the rate of GST after its inception. People expectation and estimation on the increasing rate of GST in the future will lower the public consumptions as they are unwilling to spend more on the goods and instead they are making more saving. The starting rate of GST is lower than the sales and service tax, however people is worrying the GST rate may even higher than the current sales and services tax in the future.

Worry that the effect of tax revenue re-distribution may not be achievedBesides, the proposed implementation GST is to enhance the efficiency and effectiveness of the existing tax system, however its might hard to comply with its as it involving complex accounting system and required proper audit systems too. Lastly, people is worrying that the redistribution of increased tax revenue might not be achieved or unfairly. Perhaps implementing GST will force consumers to spend less and more careful in the retail choices as people are fear of the unexpected inflation and consequences result from the implementation of GST.Low and Middle income groups will be affected badlyThe blunt tax penalises everyone in the society equally, inclusive of both the rich and the poor. Unlike the income tax or corporate tax, GST is hardly progressive. It makes necessities such as food, transport, houses, clothing and medical treatment more expensive to the exact same extent to both the rich and the poor, adversely affecting the equity of the society.

OPINION ABOUT THE IMPLEMENTATION OF GST IN MALAYSIA

Good And Service Tax (GST) also known as Value-Added Tax (VAT) is a form of consumption tax. It is a tax on the purchase price from buyer perspective. From the seller perspective, it value added to a product, material or service for its manufacture or distribution product. It was a tax that only taxed the end consumer. It value added a product or service with a sale price charged to it customer, minus the cost of material and other taxable inputs.The different with normal sales tax is that the tax is collected and remitted to the government once. While the GST, once the collected tax are given, the seller can reclaim the amount they paid. And it added value on every stage of it product production. Thus the total tax keep increasing. As the good are not a cost to the seller business, the tax it paid for the purchases can be deducted from tax it charges to the customer.But is it preferable and are really needed to the Malaysia country right now? Does the implement of GST right now are the good thing for the country? Did the GST will give revenue to the government? These question are hard to answer as the government already start the GST at Malaysia on 1st April. Even though it is a good thing to do it as a countermeasure for the depleting source of income of the country, which is the Petronas, the Malaysias state owned oil company. At the state of Malaysia now, I cannot really assure the way the government were doing. There are a lot of problem arise before and after the implement. Before the GST, there are some of the restaurant try to do the GST on their customer. Luckily there are a lot of the customer are not satisfied and report it to the authority. It is well known that the restaurant were closed since they try to do it before the date stated. The restaurant also does not fulfilled the requirement to do the GST.Not to mention, there are a lot of people are not understand the concept of the GST. Even the television which is controlled by the government have already made an ad on it, the message the government trying to convey are not delivered. A lot of people are just angry about it as the price of goods keep increasing. This is due to the before implement the retaken of the oil subsidies. When the price of the oil keep increase, the good also increases. But the problem is, when the government already take the subsidies and follow the global price. The price are not decrease and when the GST are implemented, it keep increasing. This is also a reality that the student had to take.Since the cost of living increasing, it is not the same as the wages and allowance which are not increase. Not everybody expect to have the same wages while the good price were increasing. It is the same as the student. This is not included how the study are effected by the increasing of the good price. People were expecting that the good price would decrease if the price of oil were following the global. But it did not and it give a burden as the good price keep increasing.Since the goods seller are thinking to gain profit, it give the people no others choices. And there are a lot of others problem in the government. There are a lot of minister were making speech that make people confuse. Not to mention the controversy of buying a new government personal plane. How can a government buy a plane while letting their people suffer? That was a big question to the people and the government minister keep making a statement that cannot even satisfying their people but even further making their people question the now government.As a student that are affected by the GST and confuse by the action of government, I would say that I am not agree if the GST are implement now in this country. Because the country economic were not stable. And there are a lot of thing that I as a student does not understand the concept of the GST. And not to mention how the reaction of the people that keep demand answer but there was no answer from the government. And if there a time that are perfect and the economy of Malaysia were stable, then it would be a best thing to do GST.

RELATED MATTERS

Zakat in MalaysiaZakat is one of the five pillars of Islam. It is an act of worship and like any other act of worship it is solely for Allah. It ranks in importance immediately after the prescribed prayer. It is levied on definite kinds of property and its coverage is quite extensive. It covers almost all forms of wealth and some forms of income as well as savings. Zakat can be disbursed to eight categories (asnaf) of people or services. Four of which relate to the poor and needy (eg : the destitute, the needy, the wayfarers and the debtors). Three relate to promotion of and defense of the faith (eg : new converts, to free the slaves and in the cause of Allah) lastly we have the cost of zakat administration (zakat collectors). The imposition of zakat is to purify oneself as well as ones own property. In a wider perspective, zakat is intended as a means to achieve social justice. Social justice implies that each and every individuals in a community is assured of minimum means of livehood.Sources of Zakat Fund Zakat on business Zakat on agriculture Zakat on Savings Zakat on livestock Zakat on mining Zakat on earnings Zakat fitr.

Method of collection1. Collection by appointed staff2. Collection through offices of the state religious department3. Collection through salary deduction

Calculation of zakat:a)Zakat For IncomeThe meaning of salary is someone income from his services with the employer or somebody or company orinstitution. For example : Annual salary,a years salary, variety allowance(transport, food, meeting) and others(including bonus and anything which can be describe as income).

Method A2.5 % on the amount of income per year. Example : RM 1,500,00 x 12 month = RM 18,000.00 Rate of Zakat that should be paid is: RM 18,000.00 x 2.5 % = RM 450.00 per year RM 450.00 per year divided with 12 month = RM 37.50

Method BThe income per year will be deducted with the life requirement (basic) per year. A was married and his salary is RM 1,500.00 per month x 12 month = RM 18,000.00 per year. Then, the salary is deducted to the household expenses including himself (per year) RM 8,000.00, his wife (per year) RM 3,000.00 and his child (each one) RM 8,000.00. The amount is RM 11,800.00 minus to the per year income per year = RM 6,200.00 per year. Therefore the rate of Zakat is: RM 6,200.00 x 2.5 % = RM 155.00 per year RM 155.00 per year will divided with 12 month = RM 12.91 per month.

b)Zakat of KWSPTwo views:1. To pay when retire 2. To pay every year when the conditions are correct even the money still in KWSP. The rate of Zakat is 2.5 percent.

c)Zakat of AgriculturePaddy price = 1 kilogram =RM0.60 Subsidy price = 1 kilogram= RM0.24 Price of paddy per KG =RM 0.84RM 0.84 X 1,300.49 kilogram (5 Ausuk equal to 2 Kunca 2 Nalih 6 gantang) = RM 1,102.94 The rate of Paddy Zakat is 1/10 RM 1,102.94 X 1/10 = RM 110.29

Tax IncentiveThe Income Tax (Reduction from Retired) (Amendment) Act 2000 anybody who pays Zakat will enjoy rebate for their income tax. But this amendment only covers an Individual.

Law Related on Zakat CollectionThe penalties vary from state to another Eg. Kedah- Only zakat on agriculture is required to pay at the offiice. Eg. maximum penalty RM500, minimum RM10

Zakat distribution in MalaysiaBasis of distribution:1. Principle of Istiab- To distribute to all asnaf2. Principle of had alkifayah Sufficient to asnaf3. Principle of Khususiah Special to specific asnaf

CONCLUSION

Recognition must be made of the need for the government to explore methods that increase future revenue sources. On the condition that the government does announce the GST, preparations for the implementation are crucial. The primary concern will be the impact upon low-income households in acknowledgment of the regressively inherent in a GST. The GST will put upward pressure on cost of living through inflation during the initial stages. Therefore, the government must address and strengthen the welfare state to protect those most vulnerable in society. One, all-encompassing way to provide assistance is through transfer payments in the form of vouchers and exemption targeting for goods which are deemed basic necessities. Through analyzing the implementation models in the advanced countries such as Singapore and Australia, we can see from their experiences and factor in constants in preparation for the GST implementation in Malaysia. As one of the few countries in the region that still do not have in place a broad consumption based tax system, Malaysia can refer to many countries around the world who do in preparing for a successful and smooth implementation. A common trait associated with an efficient GST system is improved international competitiveness. This is in line and a goal which Malaysia aims toward in becoming a high-income nation by 2020. Lastly and of utmost importance, if the government intends to expand the tax base and increase the efficiency of tax collection through the use of a GST, it will bring the majority of the population within the tax base. Therefore, all citizens become stakeholders in the budget and the government must begin to display strong political will to cut wastages, leakages and corruption. Prudent spending and transparent accounting will go a long way in winning over public acceptance of the GST.

REFERENCES

(n.n), Tax, (n.d), Retrieved on 8 May 2015 from: http://en.wikipedia.org/wiki/Tax

(n.n), (n.d), Direct Tax, Retrieved on 8 May 2015 from: http://www.investopedia.com/terms/d/directtax.asp

(n.n), (n.d), Indirect Tax, Retrieved on 8 May 2015 from: http://www.investopedia.com/terms/i/indirecttax.asp

(n.n), (2000-2015), Tax Structure, Retrieved on 8 May 2015 from: http://www.asiatradehub.com/malaysia/tax1.asp

(GST VINTAGE SDN BHD), (2013), GST, Retrieved on 8 May 2015 from: http://www.gst.com.my/what-is-gst-goods-and-services-tax.html

(n.n), (n.d), Good and Service Tax, Retrieved on 8 May 2015 from: http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(Malaysia)

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