The implementation of Goodsand Services Tax (GST) by the Federal Government of Malaysia on 1stApril 2015 gives many reaction from the citizens as customers and consumers. Someof them are agreed of the implementation and some of them are not.
It dependson the individual understanding. But, the complaint on the issue never stopsuntil today. It is because GST is to be blame as a main cause why the price ofgoods and services keep rising. For a small businesses, most of them are notcompulsory to register under GST because of the total of yearly taxableearning. The purpose of this study is to identify the impact of GST to thesmall businesses both registered and not in Bandar Baru Bangi, Selangor.
Thedata is gathered through questionnaires which is distributed among the ownersand managers of the businesses. The indicators of the impacts are the level ofknowledge and demographic factors. Both indicators shows that the impacts ofGST are positively related. Keywords: GST, SMEs 1.
Background of study The MalaysianGovernment has implemented GST to replace the Sales and Services Tax (SST)which is a single stage of consumption tax where businesses cannot recover thetax paid on their purchases. GST shall be charged only on the taxable supply ofgoods and services made on the purpose of business in Malaysia by a taxableperson. It also includes imported goods and services. Taxable supply is the supply under standardrated and zero rated supply. The exempt and out of scope supply is not consideras a taxable supply. Standardrated supply is the supply of goods and services that are charged with astandard rate of 6%. GST is collected by a business and paid to the government.Zero rated supply is the supply of goods and services that are subjected tozero rate.
If a business had pay input tax of this supply, it can claim it backfrom the government and charged its customers zero. Exempt supply is the supplywhich is non-taxable and not subjected to GST. A business cannot make a claimfrom the government and also is cannot charged its customers.
Onlya registered business under GST can charged GST to its customer. A business canbe a mandatory or a voluntary registrant under GST. Registration under GST ismandatory to a business that earn more than RM 500,000.00 taxable incomeyearly.
A business can be a person, soleproprietor, partnership, company, trustee, society, union, club, estate,association or any other organization including government department or localauthority which is involve in doing business in Malaysia. The calculation ofyearly taxable income can be in two ways. Firstly, taxable income for thecurrent month plus the total taxable income for the previous eleven months. Secondly,taxable income for the current month plus the total taxable income for the nexteleven months.
Thereare three option for a business to be a registration under GST which isvoluntary, group and branch registration. There is no need for a business whichearn less than RM 500,000.00 a year to register under GST. But, it can applyfor a voluntary registrant with a condition it must stay as a registrant for aperiod not less than two years. As a registrant, the business are allowed tocharge and collect GST on any taxable supplies and at the same time it canclaim for input tax credit. It also entitle to enjoy for all facilitiesprovided under the law. Abusiness registered under GST is allowed to apply for a group registration withother business as one group to centralize the administration of GST in term ofaccounting.
The conditions for a group registration are as follows: i. Agroup registration of two businesses is allowed if one business is takencontrol the other business directly or indirectly. ii.
Onebusiness from the group have to be appointed as a representative of the group. iii. Anytaxable supplies made to or by group member must be treated as made by or tothe representative of the group. iv. Anysupplies made between group members will not be treated as supplies. v.
Allgroup member have to maintain a complete record as they are responsible both byjointly and separately. 2. Problem statements Doesthe 6% of GST is a burden to small businesses? The implementation of GST willgive burden to the small businesses. It is because they have to pay extra 6%for the goods and services they acquire for the purpose of business. The extra6% is called input tax.
Input tax is charged when a business getting any goodsand services for the business input. The more the input the input they acquire,the more the input tax they have to pay. For the registered businesses, the canget GST Refund if the input tax is bigger than output tax which they collectedfrom customers. But, for non-registered business, the input tax is on theirown. One of the objective of this study is to figure how GST can give impact tosmall businesses in term of input tax. DoesGST implementation will affect the profit and loss of a business? Theimplementation of GST also makes the operating expenses of a small businesses becomesbigger. All the expenses such as license, repairs, advertising, utilities,insurance, office and vehicle expenses occur by the businesses will be chargeof GST.
The result of increment in operating expenses will makes the profit ofa business become smaller than before the implementation of GST. Anotherobjective of this study is to determine how GST can give impact to the profitof small businesses. 3. Framework Thisstudy involved theoretical framework to determine the impacts of GST to thesmall businesses in Bandar Baru Bangi, Selangor. There are two independentvariables selected which are level of knowledge and demographic factors. Levelof knowledge on GST is important to understand better about such as which goodsand services are taxable or non-taxable.
Demographicfactors are socioeconomic characteristics of a population such as age, sex,education level, income level, marital status, occupation, religion, and averagesize of family. The dependent variable is the impacts of GST on smallbusinesses in Bandar Baru bangi, Selangor. Thehypothesis is there will be significant effects on the impacts of GST on smallbusinesses in Bandar Baru Bangi, Selangor by the level of knowledge anddemographic factors. 4.
Methodology Thisstudy involve questionnaire-based data collection. The sample of respondent is selectedamong small businesses in Bandar Baru Bangi, Selangor. The businesses includes minimarkets, restaurants, grocery stores, workshops, car accessories, barber andlaundry shops. The questionnaire will be given to the owner, manager, assistantmanager, accountant or account executives of the shops as the respondents.
5. Conclusion Themain purpose of this study is to determine the significant impacts of GST tothe daily operation of small businesses in Bandar Baru Bangi, Selangor. Theimpacts will be related to the level of knowledge on GST and demographicfactors.
The better understanding on GST will result the lesser impacts to thesmall businesses. As for demographic factors, the education level will gives asignificant result which is the higher level of education, the more theunderstanding on GST