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    Posted August 22, 2014 by
    kuala lumpur

    Are Malaysians Ready for GST?


         Malaysia is a developing country in Southeast Asia, unique among the foreigners for its multiracial and multicultural society. In this end of August, the citizens of Malaysia are celebrating their National Day, commemorating its fifty-seven years of independence from the British ruling. Ever since the Independence Day, the country and its people have overcome many obstacles to achieve unity among its people and ultimately, to propel its economy growth to the positive end. Malaysia, like many other countries, was affected by the world economy recession a few years ago and hence, the citizens had to bear effect of recession on their cost of living.


         Inflation has always been an on-going problem plaguing Malaysians since years ago, although the inflation rate fluctuates throughout the years. Recently, there was news reporting the rise of inflation rate with the rise of Consumer Price Index due to higher food prices. Malaysia is known for its varieties of food and hence, its recognition as a food haven. When the Government announces the hike in prices of food, many Malaysian consumers, especially those from the middle-income and low-income groups are burdened with higher costs of living.


         Recently, in Malaysia’s Budget 2014 speech, the Government decided to implement the Goods and Service Tax (GST) to replace the current Sales Tax and Service Tax. Under the new GST system that will be enforced in April 2015, most goods and services will be charged a tax rate of 6% at every stage of the supply chain. No doubt, 6% looks so much less than the present 16% tax consumers have to pay. However, since GST is incurred at every stage, consumers who are at the end of the supply chain have to bear the cost by paying more for the goods or services they purchase.


         The idea of implementing GST in Malaysia has received divergent views from the political figures as well as the common people. Proponents opine that GST is a more effective way for the Government to collect revenue and hence, boosting the country’s economy growth. Nevertheless, some oppose the new system as they are worried about the financial burden the consumers have to bear when they have to pay more than the current price for their purchases once GST is implemented. Consequently, many people predict that they have to survive with higher cost of living next year.


         Cost of living is one of the principal factors affecting the people daily lifestyles. When people have to bear higher costs of living just for the basic necessities, some will decide to prioritise their spending while some are probably not affected so much by it. Nevertheless, there are some possible scenarios that could happen due to the climbing cost of living in Malaysia. For instance, frequent travellers will opt for travelling options within the country instead of going overseas, people spend more time at home instead of spending money on leisure activities, families reduce on dining out and many more outcomes. All these are done on the basis of reducing their spending to make their ends meet. Also, due to financial constraint, people will hesitate in buying houses, cars, technological gadgets or any situation whereby a big sum of money is concerned.


         On the contrary, there are other possibilities that could be worse. For those who do not have good financial management skills, probably the rise in cost of living are just trivial issue in their lives. This group of consumers has always lived with debts, namely from credit card, personal loan, car loans and other financial debts. For example, credit card holders who have the habit of exceeding the credit limit monthly and making most of the payment on credit terms, will not feel the pinch as much as those who always keep track of their monthly cash flow. Hence, when cost of living increases, there are chances that more debts are carried by the people.


         So, are Malaysians ready for GST? Can the people adapt to the new tax system and adjust their lifestyles accordingly? Ultimately, whether GST will help in the growth of Malaysia’s economy or put more financial burden on its people, we will only know when it is officially implemented in 2015.



    1.) http://loanstreet.com.my/learning-centre/GST-In-Malaysia-Explained

    2.) http://www.imoney.my/articles/how-does-gst-affect-malaysians/

    3.) http://julin8ng.edublogs.org/2014/07/23/is-credit-card-really-an-evil-tool/         

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