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CONTENT a.   Abstract……………………………………………………………………………………………2b.   Current SituationAbout GST In Malaysia………………………………………………

………3c.    Statement of Problemand Issue……………………………………………………….………. 4d.   ResearchObjectives…………………………………………………………………….……….

5e.   Methodology…………………………………………………………………………..…………6f.     Results……………………………………………………………………………………….……7g.   Conclusions……………………………………………………………………..

………………11h.   References………………………………………………………………………………………12            ABSTRACT Goods and Services Tax (GST) had been introduced by the Yang Amat BerhormatDato’ Seri Haji Mohd Najib bin Tun Haji Abd Razak during Budget 2014 on 25thOctober 2013 and it has been enforced since 1st April 2015 toreplace the old tax system, Sales and Services Tax (SST). It has been outlinedby the government that GST tax system will overcome the weaknesses of SST taxsystem and will reduce the burden of the society. Lately, most of the SmallMedium Enterprise (SME’s) seems dissatisfied with the implementation of GST taxsystem by the government. This is because SME’s experienced that GST tax systemdoes not conform with the purposes of the changes as stated by the government.

For this report, we had done face-to-face interview with SME’s around SungaiPetani to find out the SME’s understanding, perceptions, challenges andproblems, recommendations and hopes regarding GST tax system. We also want toidentify the SME’s experiences in dealing with Royal Customs Malaysian Department (RCMD) regarding GST taxsystem.             CURRENT SITUATION ABOUT GST IN MALAYSIA According to the Economic Report 2017/18, a total of 454, 609business entities have registered under the GST whereby the bulk of theregistrants are in wholesale, retail trade, repair of motor vehicles.

Themotorcycle vehicle sector accounted for 34. 2 per cent of the total, followed byconstruction (17. 7 per cent) and manufacturing (12. 4 per cent) sectors. Forthis year, the federal government expects to collect RM41. 5 billion in Goodsand Services Tax (GST) this year, 0.

7 per cent higher than last year’s RM41. 21billion. The report also highlighted that from April 2015 to July 2017, 14, 578 tax evasion offences were identified and 2, 097 cases were prosecutedwith 928 slapped with penalties. Since the six per cent GST implementation on 1st April2015, there had been several adjustments for the good of the economy.

Back in April 2015, 553 types of goods andservices were zero-rated while another 25 were exempted from GST. Fast forwardto this year, 2017, services that are further exempted from GST are those extendedto overseas customers for exported goods, services supplied to overseas clientsat Free Trade Zones including Licensed Manufacturing Warehouses and alsoexpenses on tools and machinery used in manufacturing. Royal Malaysian Customs Department introduced GST ElectronicInformation System on 1st July 20017 in order to strengthen the enforcement ofGST compliance.

This pilot project involves 1, 000 business entities whereby adevice is installed at every point of sale to capture and transmit real time informationback to RMCD. For Budget 2018, The Prime Minister, Datuk Seri Najib Tun Razak, has proposed that all reading materials, including magazines, comics, journalsand periodical publications will be zero-rated from Jan 1, 2018. Furthermore, the government is also proposing for GST exemption on the import of equipmentrelated to the oil and gas industry, under a leasing agreement, supplied bycompanies located at designated locations (Labuan, Langkawi and Tioman). The Finance Ministry maintained that the GST is a necessity as itenhances efficiency of the country’s tax system and widens the tax base. Recently, Deputy Minister of Finance, Datuk Othman Aziz, emphasized that thegovernment does not plan to increase the GST tariff from six percent in the future. He said the main focus of the government now is to improve the GST compliancerate in the country. STATEMENT OF PROBLEM/ISSUE The Royal Malaysian Customs Department (RMCD) found that certaincompanies and small businesses were still facing problems, especially indeclaring the correct GST-03 statements.

Some businesses and traders stillfacing the issue of filing and documentation. To overcome this issue, theCustoms Department’s personnel will take on the role of ‘ GST Ambassadors’effective Oct 15 to help businesses with their Goods and Services Tax (GST)claims, by providing free advice to them. Meanwhile in East Malaysia, RMCD facing a problem where almost90, 000 GST statements have yet to be received from companies and industries inSabah. There are 24, 610 registered GST payers in Sabah.

However, as of October2017, RMCD have yet to receive 89, 791 GST statements. Based on statistics as of June this year (2017), RMCD has issued62, 000 notices to companies that have failed to meet the requirements, forinstance incomplete form and incorrect declaration. As of today, only 10, 000 ofthe 62, 000 have made corrections. Thus, effective January 2018, those who failto submit their complete GST claims will be fined under GST Act 2014. RMCD has issued 37, 556 compounds for various GST-related offencesfrom April 1, 2015, to Feb 17, 2017. The compounds were issued for failure todisplay prices inclusive of GST, failure to submit the returns statement andpayment, tax invoices and registration-related offences. In the country, Johorrecorded highest number of compounds with 8, 104 followed by Kuala Lumpur(5, 036) and Selangor (4, 707).

RESEARCH OBJECTIVES      i.       To enquire the SMEs’ understanding aboutGST.    ii.       To identify the perceptions of SMEs towardsGST.   iii.       To find out their experiences in dealingwith Royal Customs Malaysian Department (RCMD).   iv.

To identify their challenges and problemsin dealing with GST.    v.       To enquire their hope from GST.   vi.       To find out how to improve the process ofGST.                 RESEARCH METHODOLOGY We collected our data by making aface-to-face interview with all the SMEs in our list which is Faizah TextileSdn. Bhd., Butik Siti Khadijah, Foo Seng Trading, SP Mega Home, Sri Maju andSuria Jerai Electrical Sdn.

Bhd. All of these interviewees’ premises arelocated at Lagenda Heights, Sungai Petani. We use this method in collecting the databecause it allows us for more in-depth data collection and comprehensiveunderstanding. It means that if we did not understand what our interviewee is talking, we can directly ask them for more explanations. Furthermore, the interviewsession can be considerably longer since our interviewee has a greatercommitment to participate in the interview. The commitment can be seen as theyare willingly to have a face-to-face session with us. In implementing this method, we went totheir premises and give an introduction of ourselves before we ask themquestions about our assignment.

We recorded the videos of the interviews sothat we could refer to the video in completing our report. Anyone of our groupmember will ask them question one by one. It means we will ask them anotherquestion after they have answered the question before. One person will recordin the notebook on what our interviewee answered instead of recording a video. After the interview session has end, we took a photo of our interviewee as our evidencesin the report.         RESULTS The first respondent is Tay Chye Hoo, male, 60 years old. He studies until Sijil Rendah Pelajaran (SRP) before heopened up his own business.

Mr Tay’s company, Foo Seng Trading is a SmallMedium Enterprise (SME) which sells second-grade clothes that comprise of male, female and children attire. In the interview, he states that GST has been aburden to his business. He feels that the inclusion of 6% GST has been more ofa problem rather than a solution. Regarding dealing with Royal CustomsMalaysian Department (RCMD), Mr Tay says he does not have any problems dealingwith the RCMD and the process is easy and convenient.

He later explain hisbusiness had suffered since GST has been introduced. The cost of buying getshigher and he has to sell the clothes at a price higher than before. This reduceshis monthly sales and he often gets negative feedbacks from his customers. Atthe end of the interview, Mr Tay states that he hopes the GST can be reduecedif not abolished.  The second respondent is Amirahbinti Abdul Ghani, female, 28 years old.

She is the manager for SitiKhadijah, Sungai Petani branch. Siti Khadijah is a Small Medium Enterprise(SME) that sells exclusive Islamic clothes and prayer veil. The interview wentsmoothly as she has the general knowledge about GST. In the interview, her perceptiontowards GST is not very positive. She feels that the GST is a burden and causesthe price of goods to be higher and more expensive. Miss Amirah also statesthat, not everyone is able to pay the Goods and Services Tax (GST), even theimplementation of GST is for the higher income earners. Sometimes, the middleincome earners need to buy goods /things that also includes GST, so more orless they will also be affected by the GST.

Moving on to the dealing with RoyalCustoms Malaysian Department (RCMD), Miss Amirah explains that it is quitedifficult process as we have to know the inflow and outflow of our businesstransaction. It is not very convenient based on her point of view. When askedabout whether the GST should be continued or stop, she says that she does nothave any issues if the GST is to be carried on.

Just that, she wants theGovernment to improve the system. By the end of the interview, she hopes thatthe GST system can be improved, and the government should divide between thehigh, middle and low-income earner in order to improve the system.  The third respondent, Ng Wan Ying, female, 27 years old. She is a holder of Bachelor of Accountancy from Universiti UtaraMalaysia. Miss Ng currently works as an accountant at Sri Maju Sdn Bhd. Sri MajuSdn Bhd is Small Medium Enterprise that sells stationaries.

During theinterview, she gives her fair view and honest opinion regarding the Goods andServices Tax (GST). As for her perception, she clearly states that the GST is aburden, be it to the owner of the business, or for the customers. She feelsthat the 6% rate of the GST is quite high for everyone to bear. Miss Ng alsosaid, she does not see any benefits from the introduction of the GST. Whenasked about the process in dealing with the Royal Customs Malaysian Department(RCMD), she said the process is simple, convenient and user-friendly. Thechallenges and problems dealing with the GST is that, the price of the goodsincreases and so does the cost of living. It has become a burden for the societies. Lastly, Miss Ng also gave her hope regarding the GST.

She hopes that the GSTrate can be reduced, or even better, just stop the implementation of the GST.  We very much enjoyed our dialogue with our fourth respondent. He isvery intelligent and understanding gentleman, Mohd Faris bin Zulkifli. Although he is only 18 years old, his knowledge on the current issues amazedus.

He currently helps his family business, Faizah Textile a Small MediumEnterprise (SME) in selling clothes made from “ batik” while waiting for hisapplication result to enter university. When the former student of SekolahMenegah Sains in Kepala Batas was asked about his Sijil Pelajaran Malaysia(SPM) result, he simply replied “ not bad”. Mohd Faris states that it isdifficult to give opinion about Goods and Services Tax (GST) tax system becausehe needs time to understand the system itself. In answering questions regardingthe Royal Customs Malaysian Department (RCMD), hepleased that the body is approachable and there is no problem in makingpayments as the procedures is similar to all tax payments in Malaysia. He alsoadded that the process is simple and very convenient. Regarding GST, so far, hewas clearly upset about the implementation of GST tax system in Malaysia. Heexplains that it is not worth for a business to give a part or 6% of theirbusiness’s profit when there are no benefits in return because the amount givento the government can be used for other purposes in improving the business.  In anger tone, he said that the effort theyexert in making profits is not worth when there are no benefits outlines by thegovernment for business implementing GST tax system.

He hopes that theregulatory body or the government can outline the GST tax system’s benefits asreferences and if not, he thinks that the system should be put to an end. When we are interviewing with our fifth respondent, Miss EuniseGoh, it was one of those interviews that you struggle to get her response. She is very kind to receive our interview although it is an inappropriate timeas she is closing the shop’s account for the day. Sheis an accountant for SP Mega Home, a Small Medium Enterprise (SME) in trading goodsto the public in relatively small quantities for use or consumption also knownas retail. She refused to answer any personal questions as it is not related tothe Goods and Services Tax (GST) tax system.

Miss Eunise Goh thinks that GSTtax system is a burden for the small business like them. From time to time, thesystem reduces the consumer buying power as the price of goods and servicesincreases. It is hard to get her attention during the interview and all thequestions asked is replied by “ We only follow the rules.”. For questionsrelating to the Royal Customs Malaysian Department(RCMD), she said that the government already provides the guidelines and wejust need to follow them. She added that it is easy if we follow the rules setby the government. Regarding the problems and challenges experienced so far inimplementing GST tax system, she said that the business experienced no benefitsfrom GST tax system as mentioned by the government. The business can recoversome of GST tax payment made but it is not enough to show that there is benefitsto earn from implementing the system.

She also said that the remuneration orsalary level in Malaysia is low compared to the cost of living that ariseday-by-day. She hopes that the current percentage of 6% GST system can be loweror even better the tax system could be stop.  The last respondent, Ros Affandy is a great guy. He iseasygoing and a very bright person.

He seems energetic although he just cameout from a meeting with his clients. His interview was a bit slow to start, ashe is so thoughtful and seemingly bright, yet as things got rolling, he wasvery open minded. He is the accountant for Suria Jerai Electrical Sdn Bhd, aSmall Medium Enterprise (SME) in selling electrical goods and he is the oneresponsible to register the business with GST tax system. He is in his earlythirties and is a graduate from University Putra Malaysia in Master inTaxation. Ros Affandy thinks that Sales and Services Tax (SST) is a bettersystem and more user-friendly compared to the new Goods and Services Tax (GST) taxsystem.

He said that the new tax system gives more burden to the low-incomeearners compared to the high-income earners. He added that high-income earnershave excess money to cover their additional GST expenses but low-income earnersonly have sufficient money to survive for the month in high tone. Regardingquestions related to Royal Customs Malaysian Department (RCMD), he said thatthe regulatory body is approachable and always open for public to ask anyquestions relating to the tax system. The registration procedures and the taxdeclaration are easy to understand and convenient. For the challenges andprocedures, he said that the tax is already implemented for couple of years butthere is information asymmetry between the government and the public regardingthe tax system. The public still do not understand about the GST tax system andthere is no appropriate action taken by the government to resolve this matter. He also said that Inland Revenue Board (IRB) should monitor the business aroundthe country regularly because most business put ridiculously high price fortheir goods and blame the rising oil price and do not reduce the price of theirgoods when the oil price has dropped. He claimed that the most essentials goodsalready subject to GST increases the cost of living and there is no hope forthe GST tax system.

He hopes that the government will put a stop to GST taxsystem and return to the old SST tax system.                 CONCLUSION As a conclusion, the implementation ofGoods and Services Tax (GST) since 1st April 2015 has been a burdento the societies. This is based on our interview that all of our respondentssaid that, the GST has been nothing but a burden since its implementation. Since the implementation of the GST, the societies had suffered a lot becauseof the increasing price of the goods and the burdening lifestyles they have toencounter. We also receive some recommendations from the respondents. As anexample, one of the respondents suggest that the government should revise anddifferentiate the GST tax system based on the total income of the societies.

Furthermore, one of the respondents also said that, the Government shouldoutline what is the benefits of GST because he claimed that he does not see anybenefits the GST brings to the societies. As for the next respondents, theysaid that, they want the Government to stop the GST and bring back the Salesand Services Tax (SST).   They wouldprefer the GST to be stopped. If not, the reducing of the GST rates arewelcomed with an open arm.

REFERENCES  1.   “ 2018 Budget: GST aBold and Proven Move by Government.” NST Online, New Straits Time, 27 Oct. 2017, www. nst. com. my/news/nation/2017/10/295833/2018-budget-gst-bold-and-proven-move-government.

2.   “ RM41. 5b Collectedfrom GST in 2017.” NST Online, New Straits Time, 27 Oct.

2017, www. nst. com. my/business/2017/10/295658/rm415b-collected-gst-2017.  3.   Chie, Kow Gah. “ GSTTak Naik Walaupun Selepas PRU, Kata Timb Menteri.” Malaysiakini, 29 Nov.

2017, www. malaysiakini. com/news/403733.

4.   Iskandar ShahMohamed. “ Customs Personnel to Play Role of GST Ambassadors; Aid and EducateTraders, Businesses.” NST Online, New Straits Time, 3 Oct.

2017, www. nst. com. my/news/nation/2017/10/287047/customs-personnel-play-role-gst-ambassadors-aid-and-educate-traders 5.   Zam Yusa. “ SabahWaiting on Almost 90, 000 GST Statements.

” Free Malaysia Today, New StraitsTime, 11 Dec. 2017, www. freemalaysiatoday. com/category/nation/2017/12/11/sabah-waiting-on-almost-90000-gst-statements/. 6.   “ Customs Dept Issues37, 556 GST-Related Compounds.” The Star Online, Star Media Group, 8 Mar.

2017, www. freemalaysiatoday. com/category/nation/2017/12/11/sabah-waiting-on-almost-90000-gst-statements/.