26 October 2013

GST in Malaysia – How the Goods and Services Tax affects You

As the Budget 2014 (tabled on the 25th of October 2013) announcement came, Malaysians awaited with bated breath on whether the government of the day will or won’t finally introduce a Goods and Services Tax (GST) in Malaysia. 

A GST of 6% was announced, with the abolishment of Sales Tax and Service Tax effective 1 April 2015.

Read our guide below to find out all about the GST, get the full low down on why it’s being introduced, and what it means for you!

Wait, don’t we already have GST in Malaysia? I’ve seen it in some receipts…

Confusingly, there are 2 other indirect taxes already present in the Malaysian tax system. One of them is the Sales Tax (as per the Sales Tax Act 1972), and the other is the Service Tax (under the Service Tax Act 1975). Combined, they are usually referred to as the SST.
The Service Tax part  is the one that is sometimes confusingly referred to as the Government Service Tax (or “GST”) but it is not the usual use of the GST acronym worldwide, Goods and Services Tax.
Note that the Sales Tax and Service Tax are not to be confused with a “Service Charge” of 10% typically present in the hospitality industry (hotels, large restaurants etc.). This charge is not a tax, and the restaurant typically keeps the 10% (and maybe shares some of it with their staff).

Sales Tax – 10% tax on manufacturers and importers

The Sales Tax of 10% is collected from all manufacturers or importers who have yearly revenue of RM100,000 and above. Licensed manufacturers are to charge 10% sales tax on sales value of their manufactured products and to collect the tax from their customers, and remit to Customs every 2 months.
There are a number of items which have a special Sales Tax rate of 5%, and the following manufacturing and import activities are exempted from sales tax (ie. 0%):
  • All exports are exempted from sales tax.
  • Live animals, fish, seafood and certain essential food items including meat, milk, eggs, vegetables, fruits, bread, etc.
  • Medical and educational equipment including sports equipment, books, etc.
  • Photographic equipment and films.
  • Motorcycles not exceeding 200cc capacity, bicycles for adult use.
  • Machinery for textile industry, food preparation industry, paper and printing industry, construction industry, metal industry, etc.
  • Primary commodities including cocoa, rubber, etc.
  • Naturally occuring mineral substances, chemicals, etc.
  • Helicopters, aircraft, ships and other vessels.

Service Tax – 6% tax on service providers (and RM25-50 / year per credit card)

Previously 5%, raised to 6% in January 2011, the Service Tax applies to certain items in the service industry including food and drink outlets and tobacco. The tax also applies to professional and consultancy services provided by the professional firms or persons such as accountants, lawyers, engineers, architect, insurance companies, etc. and is also remitted to Customs authorities every 2 months.
This 6% Service Tax is the thing that is frequently called GST (Government Service Tax) although in international convention, GST normally stands for Goods and Services Tax.
Adding to the confusion is the recent introduction of a RM50 / year Service Tax for principal credit card holders (per credit card) and RM25 / year for supplementary credit card holders, both falling under this Service Tax nomenclature.

What is the Goods and Services Tax (GST)?

Known across the world as either GST or VAT (value added tax), it is a broad-based consumption tax (tax on your spending!) which affects all parties in a multi-stage taxation system across the value chain from manufacturing to sales, it is based on a tax-on-value-add concept which avoids duplication of taxes. This is in contrast to both the Sales and Service Tax in Malaysia which is just added at one stage (Sales Tax at manufacturer level, and Service Tax at consumer level).
The Goods and Services Tax in Malaysia (GST) was initially mooted by the federal government in 2011 to replace the existing Sales and Service Taxes, but was met with much resistance from the public at large, partially due to the implication of a price hike in essential goods and services, but also partially due to the lack of clarity around the current consumption tax systems in Malaysia.

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.

Why replace Sales Tax and Service Tax (SST) with GST?

The government’s intention has always been to replace the sales and service tax regime with GST and to do so at a GST rate that is revenue-neutral. This means that (when it gets introduced anyway) they don’t expect to collect any more or less taxes than they did before. Why would they bother then?
Well, the GST unit of the Royal Malaysian Customs Department gives us the following reason ‘method of collecting taxes which works better than others’ to explain the need for GST. Economists, meanwhile, believe the government has very rightly approached the GST as a new source of income with a broad tax base as a means to begin to diversify tax revenue sources.

So if the 10% Sales Tax and 6% Service Tax is abolished, does this mean GST will be introduced at a rate of 16% to make this a revenue-neutral exercise?

It might seem like simple arithmetic, but as mentioned before, not all items are subject to 10% Sales Taxes (some 5% and some 0%), and likewise with the 6% Service Tax (and rarely are 2 items subject to both Sales and Service Tax, as one targets the manufacturing and import industry, and the other the service industry). As such, a 16% GST rate (with no exemptions) will definitely result in higher prices across the board!
As a result of this, to make the introduction of GST a revenue-neutral exercise for the federal government, an initial rate of 4-7% had been proposed, with some essential items given a zero-rate mooted as well.
The final rate that was announced on 25 October 2013 was 6% GST, with the following items 0% rated (and thus exempt):
- Essential items such as: Rice, sugar, salt, flour, cooking oil
– Public transport (LRT, KTM, Buses)
– Sale and Rental of property

How will the implementation of GST affect me?

As mentioned, the replacement of Sales and Service Tax with GST is intended to be revenue-neutral to the government’s coffers, so in theory, to consumers this may represent a minimal effect to the aggregate prices of everyday goods and services. Lets look at 3 scenarios to see what it means for prices, (1) for items charged with Service Tax, (2) for items charged with Sales Tax, and (3) for items with no Service or Sales Taxes:

6% Service Tax Abolished, 6% GST introduced - Pay less

While most consumers don’t directly see the current 10% Sales Tax (its mostly a business to business tax), many of us experience the 6% Service Tax (when we eat at food outlets and restaurants like McDonald’s and Starbucks, and when we engage a lawyer for services etc.). As per our earlier graphic, if the rate of GST is at 6%, there won’t be any price increase on items.

10% Sales Tax Abolished, 6% GST introduced - Pay less

Similar to the earlier example, you may end up paying less if a product manufactured or imported now is subject to 6% GST rather than 10% Sales Tax. gst vs sales tax

SST Exempt Items, 6% GST introduced - Pay more

With that in mind, sectors of the economy which were not covered under the Sales and Service Taxes may now be under the coverage of GST, as it is a broad based tax measure. Unless these things are zero-rated (ie GST is applicable, but at a 0% rate), prices of goods not previously covered under those 2 tax systems will now be affected by the broad based GST and cost more. gst vs no gst

However, the obvious concern here is to make sure that businesses do not take advantage of just the fact that GST has been introduced as a reason to raise prices of goods and services indiscriminately. To this end, the Anti-Profiteering Act has been tabled to enable enforcement against such practices. In theory though, the multi-stage tax nature of the GST should allow the Customs department to aggregate pricing information far more accurately than they do currently, the implied monitoring of this should serve as a deterrent to unscrupulous businesses (will wait and see how things pan out!).

How does the GST affect SMEs in Malaysia?

As the total GST amount is paid for by customers (parts of it effectively paid across the value chain, through GST input credits etc.), businesses are not affected directly by price increases due to GST.
The added cost through the implementation of GST will be due to administration of GST input credits and accounting for GST. Because of this, businesses with an annual turnover of less than RM500,000 are exempted from being GST registered and will thus not be required to collect or pay GST.

Source >> savemoney.my

06 October 2013

Earthquake gives birth to brand new island off Pakistan coast

Satellite view of the new island raised from the sea bed near the city of Gwardar, Pakistan in the wake of the recent earthquake. Image at right shows the scene in April before the island’s creation. Click to enlarge. Credit: NASA
On September 24 a major earthquake rocked western Pakistan killing at least 515 people and leaving more than 100,000 homeless. While the death and devastation caused by the 7.7 magnitude temblor makes the mind and heart reel, amid the chaos a new island was born. Its muddy top surfaced offshore in West Bay near Gwadar, Pakistan some 230 miles (370 km) from the epicenter.

Great little video of local people exploring the newly-birthed island
Two days later on Sept. 26, the advanced Land Imager (ALI) on NASA’s Earth Observing-1 (EO-1) satellite took the picture above of the newly exposed sea bottom located 0.6 miles (1 km) from shore.
“The island is really just a big pile of mud from the seafloor that got pushed up,” said Bill Barnhart, a geologist at the U.S. Geological Survey who studies earthquakes in Pakistan and Iran.

Aerial view of the new island off the southern coast of Pakistan in the Arabian Sea. It’s 250-300 feet
across and 60-70 feet high. Boaters are anchored off the island at upper right.
Credit: National Institute of Oceanography
The island, seen closeup in the aerial view, extends 250 to 300 feet (75-90 meters) across and stands 60 to 70 feet (15-20 meters) above the water line. The surface is a mixture of mud, fine sand, and solid rock. In the video, you’ll see people already treading on what a day before had been the bottom of the sea.

Earth’s crust or lithosphere is broken up into distinct plates of lighter rock rafting atop the denser, slightly viscous rocks of the upper mantle. There are 8 major plates and many minor ones. The island is near the active boundary of the Arabian and Eurasian plates. Credit: Wikipedia
Small, short-lived islands are fairly common in this part of the world. As the Arabian continental plate dives beneath the Eurasian crustal plate, accumulated mud (sediments) are scraped off and deposited as temporary islands. Earthquakes can create new islands, too. When a shallow pockets of gas like methane or carbon dioxide get trapped under pressure by layers of muddy sediments, powerful seismic waves can trigger their sudden release.
“When that layer becomes disturbed by seismic waves (like an earthquake), the gases and fluids become buoyant and rush to the surface, bringing the rock and mud with them,” said Barnhart.
Watch out! Highly-flammable methane still vents from the brand new island. When I saw someone setting it afire in the video, it made me wonder how we’ve managed survived so long on this planet without blowing ourselves up.
Like the fate of many islands before it, this one will likely disappear. Underground gas will cool and compress or simply escape, allowing the raised crust to sink back down into the sea bottom. Waves and weather will nibble the island to pieces, returning it back to the sea in a matter of months.

- See more at: http://astrobob.areavoices.com/2013/09/28/earthquake-gives-birth-to-brand-new-island-off-pakistan-coast/#sthash.wGrm9Q5x.dpuf

02 October 2013

United State Of America is Shutting Down...

Poor management of budget and eager to go to war maybe is some of the cause... We may become like them if the goverment fail to manage the upcoming budget properly...

The US Congress has failed to agree a budget by 1 October and a federal government shutdown has begun, sending more than 700,000 federal workers home and closing down national parks, museums, federal buildings and services.
Which key departments and agencies are affected?
Graphic showing the impact of the shutdown
line break
Department of Defense
US military Military personnel on duty will not be affected
The nation's 1.4 million active-duty uniformed military personnel will stay on duty.
About half of the defence department's 800,000 civilian employees will have to stop work, but there is a blanket exception for activities that "provide for the national security".
But where employees are needed to work, they may have to do so without pay:
"Military and other civilians directed to work would be paid retroactively once the lapse of appropriation ends," according to Defence Department Comptroller Robert Hale.
President Barack Obama later told civilian employees that they deserved "better than the dysfunction we're seeing in Congress".
line break
Department of Energy
  • Employees: 13,814 Due to work: 1,113 Staying at home: 12,701
Hydroelectric dam Hydroelectric dams will be maintained
Most Department of Energy facilities will close, with only 1,113 out of 13,814 staff required to work.
Exemptions include staff overseeing the safety of the nation's nuclear arsenal and operating dams and power lines across the country.
The National Nuclear Security Administration, which oversees the nation's nuclear weapons and naval reactor programmes, will have 343 employees on duty to "perform functions related to the safety of human life and the protection of property".
More than 400 employees will stay on to work at the Southwestern Power Administration and the Western Area Power Administration, which are in charge of overseeing hydroelectric power and power lines in the south and western US.
Some staff in other areas will remain at work to oversee "the protection of human life and property."
line break
Department of Commerce
  • Employees: 46,420 Due to work: 6,186 Staying at home: 40,234
Ocean and the San Diego skyline Weather and shipping reports will still be provided
Most of the department's staff will remain at home. However, staff at the National Oceanic and Atmospheric Administration will continue to report for duty to ensure weather, shipping and other reports are still provided for public safety.
Some of the workers at the Bureau of Industry and Security, which reviews exports, will also remain on duty.
line break
Department of Transportation
  • Employees: 55,468 Due to work: 36,987 Staying at home: 18,481
Airport Most air traffic control roles will not shut down
Transport roles run by the department, ranging from air traffic control to airport and hazardous materials inspections, will continue and 36,987 out of 55,468 personnel will remain at work.
Staff involved in overseeing commercial space launches will also continue operations - as at least one of a succession of launches will occur between the end of September and the first week in October in support of the International Space Station, according to the department.
Suspended activities will include facility security inspections, routine personnel security background investigations and the employee drug testing program.
line break
Smithsonian Institution
  • Employees: 4,202 Due to work: 688 Staying at home: 3,514
Tian Tian Animals at the National Zoo will still be fed
The National Zoo and 19 museums and galleries, including the Natural History Museum, the Portrait Gallery and the Air and Space Museum, would close.
Of the 4,202 employees, 688 will be retained to "protect life and property" - security guards, maintenance staff and people to care for and feed the animals at the National Zoo.
The Smithsonian Institution says: "During a shutdown, the Institution cannot legally accept voluntary services from federal employees to continue their regular duties."
line break
National Parks
  • Employees: 24,645 Due to work: 3,266 Staying at home: 21,379
National Park National Parks will be closed
National parks - from Yosemite to Alcatraz and the Statue of Liberty - will be shut down with 3,266 essential staff out of 24,645 remaining on duty. These will include some fire management, law enforcement and emergency responders.
Day-use visitors will be instructed to leave the park immediately and visitors using overnight facilities will be asked to make alternative arrangements and leave.
Where possible, park roads will be closed and access denied.
line break
Department of Homeland Security
  • Employees: 231,117 Due to work: 199,822 Staying at home: 31,295
Coast Guard Coast Guard operations will continue
About 86% of the Department of Homeland Security's 240,000 employees are expected to be exempt from the shutdown, including uniformed agents and officers at the country's borders and ports of entry.
Most members of the Coast Guard, Transportation Security Administration, Secret Service and other law enforcement agencies are exempt.
US Citizenship and Immigration Services employees will continue to process green card applications.
line break
Department of Justice
  • Employees: 114,486 Due to work: 96,744 Staying at home: 17,742
DEA badge DEA agents will be exempt
Of 114,486 Department of Justice employees, an estimated 96,744 will be exempt from the shutdown.
All Federal Bureau of Investigation (FBI) agents and support personnel in the field will be exempt as their operations are focused on national security and investigations involving protection of life and property.
Drug Enforcement Administration agents working on active counternarcotics investigations, agents in the Bureau of Alcohol, Tobacco, Firearms and Explosives, and US attorneys will be exempt.
Staff at federal prisons will also be expected to work.
line break
Department of Health and Human Services
  • Employees: 78,198 Due to work: 37,686 Staying at home: 40,512
Flu jab being administered The annual flu programme will not be supported
The department will be sending home more than half its workers.
The Centers for Disease Control and Prevention will continue "minimal support to protect the health and well-being of US citizens". However, fewer staff will mean reduced capacity to respond to outbreaks and the agency will be unable to support its annual flu program.
line break
Department of Education
  • Employees: 4,225 Due to work: 212 Staying at home: 4,013
Students eating breakfast Funding for schools, due this month, will be paid
About 212 of the department's 4,225 employees - both full and part-time - will be expected to work for the first week. An additional 30 staff may be called in if the shutdown lasts more than seven days.
Some $22bn of funding to schools, due on the 1 October, will still be distributed. Among other things, this pays to help educate poor and disabled children.
line break
Environmental Protection Agency
  • Employees: 16,205 Due to work: 1,069 Staying at home: 15,136
Administrator Gina McCarthy said her department would effectively shut down with only a core group of individuals available in case of a "significant emergency".
line break
US Postal Service The self-funded US Postal Service will remain open and deliver as usual. The agency receives no tax dollars for day-to-day operations and relies on income from stamps and other postal fees to keep running.

Source >> http://www.bbc.co.uk/