It will see a more transparent tax system which has long been adopted by most of the country’s ASEAN neighbours.
Interestingly in ASEAN, Indonesia was the first to implement the GST in 1984 at 10 per cent, followed by Thailand in 1992 (10 per cent), and Singapore in 1993 (three per cent).
Then, the Philippines adopted the GST in 1998, followed by Cambodia and Vietnam in 1999 and Laos in 2009, all at a similar rate of 10 per cent.
Thailand has now reduced its rate to seven per cent, while the rest have maintained the 10 per cent, with Singapore increasing its rate to seven per cent and the Philippines, 12 per cent.
Brunei and Myanmar have yet to introduce the GST, while Malaysia has now taken the bold step to implement it.
The government has emphasised the need for people to understand the GST before its actual implementation and hence, no efforts were spared by the Customs Department, other relevant agencies and the media, towards this.
Much information on the GST has been provided on relevant government websites and constantly reported to educate the public.
Many had no qualms about paying the tax but others took advantage of the situation, leading to public confusion and hoarding. But continuous promotional efforts will hopefully help add clarity to the GST.
The government will take stern action to ensure that businesses do not take advantage of the GST implementation to increase prices of goods to make excessive profits.
The GST, also known as the value added tax (VAT), is a multi-stage consumption tax, levied on the supply of goods and services at each stage of the supply chain, from the supplier up to the retail stage of the distribution.
However, the six per cent tax does not become part of the cost of the product because GST paid on the business inputs is claimable.
Efforts to introduce the GST to replace the existing Sales and Service Tax (SST), were earlier met by negative response or rather confusion by the general public, which felt that the former would cause prices of goods to increase.
But then, few realised, they were all along, already paying the SST at the rate of 10 or five per cent.
The sales tax was already embedded in the prices of goods, for example, electrical products, clothes and household appliances, as the tax is imposed at the manufacturers level or at the point of import.
By the time the goods reach consumers, the sales tax paid at the manufacturers level, would have cascaded into the sales price at each level of the distribution or supply chain.
On the other hand, the GST which will be applied at every stage of the distribution or supply chain, enables businesses to claim it back as credit.
Hence, the GST is a better tax system as it eliminates the double taxation under the current SST and consumers end up paying fair prices for most goods and services.
Nor, will it victimise small businesses or favour big corporations.
For businesses, they are able to reduce the cost of doing business in being able to claim the GST incurred on business inputs.
Being a progressive tax system with a long list of exempted, zero-rated and relief supplies, the GST will not burden the lower and middle income groups as the bulk of their income will be spent on these items.
A lot of negative hype may have tracked it, but interestingly, of the 193 countries in the world, about 160 have already implemented the GST.
Being an equitable tax system with self-policing features, it will ensure compliance, while tax evasion will be checked by the mechanisms of GST.
Not all goods and services will be subjected to the GST as certain basic food and amenities are free from tax, while the sale and rental of residential and agricultural properties and services like private health and education as well as public transportation, are exempted from the GST.
GST too will not be charged on exports.
To make exports more competitive, GST on exports will be zero-rated and the exporter can recover all the input tax incurred in the course of his business.
As for imported goods, these are subject to import duty and sales tax. But the sales tax will be replaced with the GST.
Again, the government will take strict measures to ensure traders do not take advantage by using the GST as an excuse to raise the price of goods, for the purpose of making excessive profits.
Among the measures is enforcing the Price Control and Anti-Profiteering Act 2011, intensify enforcement through the establishment of National Price Council, publication of the Shopper’s Guide as well as making supermarkets the benchmark price or price setters.
Meanwhile, companies with a yearly revenue of RM500,000 or more are required to register for the GST, while those below that threshold can voluntarily do so.