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Sakmongkol ak 47

Tuesday, 8 April 2014

Honest and Transparent under GST Regime do not mean Fair and Just

Why will the price of goods increase after GST? Will there be inflationary effects, i.e. a general rise in the price of goods and services?  
Parliament yesterday rushed through an important bill that affects the lives of the majority of us. Many of us who registered to speak on the policy stage did not get the chance to speak because the speaker limits the number of speakers. And since we rejected  the bill in its entirety for a second reading there were no debates at committee stage.
It is clear in the case of the bill pertaining to GST, the government plans to rush through. They did. they came in full force fearing if they didnt, the opposition may outvote then. Minus the ones who are not in the country and are sick, 81 of us opposed the bill. 
Even the withdrawn PM was in parliament yesterday. BN had the superior numbers, courtesy of the technical victory they obtained in GE13. 
We who represented the 53% of those who actually rejected BN in GE13, opposed this GST Bill. We will continue to explain to the people, why GST is anti people.
We all know the reason why GST is rushed. The government has run out of money. We will regret the day when parliament approves to place more money in the hands of a government that has no fiscal prudence in its vocabulary.
Will the price of goods increase? They will. Its unlikely that transactions along the supply chain will be smooth. There will be stock build ups. Sellers will impute holding costs if they cannot sell as fast as they want. There is also an element of risk to be factored in. the government says it can settle the tax claims within 14 days. Now they say they can. In practice they cannot. Delayed time means cost. All these will be factored in.
Then, please abandon this illusion. Sellers don’t sell at cost plus GST. If they buy at RM100, GST at 6% is RM6, they won’t sell at RM106. They may want to sell at 200 or 300. Unless the government implements a anti-profiteering law. Then what level of profit is considered fair and what level isn’t fair? The government says its pro-business right?
There will be. When prices go up, they are unlikely to come down. So I am not sure what Ahmad Maslan means, there will be initial price increase and then stabilise. Stabilise means go down before GST? He cited a number of goods that will not change in price? Are these price-controlled items? As to the goods that go down in price, I am not sure which type.
If you look at the basic model in the GST economy you will notice a flow of goods from the wholesaler to the retailer to the end consumer.
When the wholesaler buys good x- say a TV, he pays an input GST which he can claim from the government. Let’s say he buys a TV set RM100. He pays an input GST of RM6. (6%). When he sells to the retailer, he charges output GST which he remits to the government. He is the collecting agent.
The price he sells to the retailer is not cost price plus 6% GST. Why should he do this? He doesn’t sell at RM106. He sells at a price he wants to make a certain profit. It does not matter if he sells for example at RM200. He has been transparent- he declares he bought at RM100. He and the government know, the input GST is RM6. He has told the truth. The government accepts he has told the truth.
When he sells at RM200, he will pay the output GST of RM12. No problem there. He is transparent. The government accepts he is transparent. The government announces it’s a transparent transaction. There is no law to say he cannot sell at RM200 so that he makes a RM100 profit.
The retailer buys at RM200. He pays input GST of RM12 to be claimed against the government. Retailer wants to make a RM300 profit. So he sells TV at RM500. Since he is GST registered, he charges the end consumer GST. He charges an output GST of 6% of RM 500. That is RM30.
 The output GST he collects on behalf of the government is RM 30.
No problem there. He has been honest and transparent. He has declared he buys the product at RM200. He and the government know the input GST. He now wants to sell at RM500. There is no law that says he cannot sell at RM500. He does not have to sell at cost plus input GST i.e. RM200 + 12. (212). He wants to sell at RM500. That is legal. He declares this and sells at RM500. He wants to make a profit of RM300. He and the government know he has collected output GST of 6% x 500= RM30.
The end consumer buys at RM500. He pays GST of 6% which is RM30. That is his input GST. He is not GST registered. He does not sell out to anyone else. He pays RM500 plus RM30 GST under the illusion that all along, honest and transparent transaction from the wholesaler to the retailer to him has taken place.
The original price of RM200 has in the end become RM500. Perfectly legal. So the definition of honesty and transparent in a business transaction is to declare as it is. The government doesn’t judge to say, the profit margin of RM100 (wholesaler to retailer) is exorbitant. The govt does not judge to say the profit margin of RM300 (between retailer and consumer) is unconscionable. That’s not important. The important thing is, each stage in the supply chain has declared honestly and transparently how much they bought and how much they sell.
1. wholesaler
  • Pays GST to government for imports

    Import value = RM100
    Import GST paid = 6% X $100RM6 (input tax to claim from Govt)
  • Pays GST RM6.
  • Charges and collects GST for sale of TV to retailer

    Selling price to retailer = $200
    GST charged to retailer = 6% X $200 = RM12 (output tax to pay govt)
  • Net GST is RM12-RM6= RM6
2. Retailer
  • Pays GST to Manufacturer

    Purchase value = $200
    GST paid = 6% X $200=RM12 (input tax to claim from govt)
  • Charges and collects GST for sale of TV to end consumer

    Selling price to end consumer = RM500
    GST charged to end consumer = 6% X RM500 = RM30 (output tax to pay govt)
  • Net GST is RM30-RM12=RM18
3. End-consumer
  • Pays GST to Retailer

    Purchase value = RM500
    GST paid = 6% X RM500=RM30
End consumer is not GST-registered. Therefore, he cannot claim GST paid on his purchase from govt.

What is the total GST paid? The difference between input and output GST is the net GST paid to and collected by the government. The total paid is RM6+RM6+RM18=RM30 which is exactly the GST paid by consumer to retailer.
We must refuse to believe that we pay a price of cost plus GST. The price level is fixed as the seller pleases depending on the profit margin he wants to make. The government does not see him a lesser person if he does this as long as you claim and remit what belongs to the government. You can make as much profit as you want. Honesty and transparent in the government’s book, do not equal fair and just.


Anonymous,  8 April 2014 at 09:55  

Damn this useless & corrupted UMNO/BN Government. We the rakyat have to bear & pay for their stupidity.

bruno 8 April 2014 at 11:52  

Dato,malaysia a country so blessed with so many natural resources,including a blackish liquid called the black gold.A country so rich in natural resources in the end have to charge it's citizens GST plus all sorts of taxes,because no matter how rich the country is,it cannot sustain corruption and containers of haram money being smuggled out.

Soon when the taps of the black gold runs dry,what will happen then when the alongs called in their markers.Will the corrupt gomen close it's doors or shops.Or will they aution off the branded goods their spoilt spouses bought with the people's money.

Sometimes I think that the people with the sore butts do not even know that they have been sodomised.If they did they wouldn't have voted for the Umno/BN.Well,we can all only hope that the PR can come out with some creditable Malay leaders that can be accepted by Umno/BN supporters.If they cannot then Umno/BN will rule the country forever.

More pain will soon be on the way.Worst then the GST.The stock markets of this very small planet we lived in will soon be going to the dogs.Over leveraging and the along's(bankers) calling back their markers will forced the over leveraged players to sell their stocks and it will fall like dominoes.When the world economy falls into a deflationary depressionary type of recession,one that haven't been seen in decades because of the bubbles caused by the world's central bankers.Time is running out and it will just be a matter of months for stock markets around the world to fall like house of cards.

Donplaypuks® 8 April 2014 at 21:31  

When S'pore introduced GST in the '90's, there was an immediate one-off spike in inflation to over 6% which returned to normal rates after a couple of months. That happened with other countries which implemented GST, and will happen with M'sia as well.

The clueless BUMNO/SCUMNO Minister is of course talking utter rubbish when he says prices will not rise in general. GST is a broad-based consumption tax, as many items that were not subjected 6% Sales and Service Tax, will now be. As usual, the man-in-the-street, the ultimate consumer, will be the hardes hit by 6% GST since he will not be able to off-set any output tax against GST on his expenses.

But, these price rises will mainly arise from the increase in administrative cost that all business entities will face - cost of new software/hardware and additional staff to collate GST and file returns.

Businesses simply cannot wildly increase their prices by 100%-300% simply because of GST; market conditions and competition will prevent that unless one is a monopoly like Tenaga, Telekom, Astro etc.

So, in a period of 1 year after GST is introduced, prices will rise on average by about 3%-5% over the normal rates of inflation, and then stabilise. That, I believe is what the deletrious effects of GST will be.

But, nevertheless, I am against the introduction of GST until Najib's Govt of Thieves (and looters and plunderers) first reduces corruption and admin inefficienciy to the bare minimum, brings everyone possible into the tax net, trims excess fat in the civil service and reduces overspending on useless projects and in government procurement.

If all that is done quickly, we may have no need of GST for a good 5 years!!

Anonymous,  8 April 2014 at 21:35  

GST is to pay for the
1PM-cum-Finance Minister's
(reckless) fiscal irresponsibility
and shameless vote-buying.

Phua Kai Lit

Anonymous,  9 April 2014 at 12:45  

Of the people, by the people and for the people of 47 percent rushed for the bill approval is a desparate move to secure financial difficulties they are facing

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