INTRODUCTION As we know, the goods and services tax will be held in Malaysia from 2011.

On 24 November 2009, Malaysia Prime Minister, Dato Sri Mohd Najib Tun Abdul Razak had announced that a bill relating to the proposed introduction of GST Goods and Services Tax will be tabled at the end of the current Parliament Sitting. Goods and Services Tax will be implemented starting 3rd quarter of year 2011. Therefore, all Malaysian have to prepare them self to pay 4% extra for everything they buy or service. Here we are to discuss how good and service tax will affect the manufacturing sector. First of all, under the title we will discuss and provide good and service tax purposes and also manufacturing purposes. We will also provide examples of implementation carried out in foreign countries. a) GST ( Good and Service Tax )

GST is a domestic consumption tax applicable alike on all goods and services. It will eliminate the differential treatment of manufacturing and service sector. It shall be a multi-stage tax where the ultimate burden shall lie on the consumer. The dealer shall charge GST on output and pay GST shall be payable as tax. Thus, tax is payable only on value addition with no cascading effects. GST was implemented in many foreign countries such as Singapore, India and other. The tax rated of GST is different from other country and depend to the country it self. The rated of tax expected as below: Standard item (14 to 16%) Necessities (6 to 8%) Precious metal (1%) Exempted item (0%) Zero rated (0%) Services (standard rate) Where GST is implemented, the taxpayer must be registered with the Royal Malaysian Customs once the taxpayer achieves a certain prescribed annual sales turnover. The registered taxpayer would also be required to submit periodic GST returns. If the output tax is greater than the input tax, the taxpayer will have to pay the excess. Conversely, if the input tax is greater than the output tax, the taxpayer could seek a refund from the Royal Malaysian Customs.

In addition to the compliance requirements above, taxpayers would be required to undertake additional administrative work which includes, amongst others, keeping track and recording all input taxes paid, undertaking reconciliations and filing of GST returns. Thre are example how GST work:

Supplier

Seling price = RM100 GST (4%) = RM4 Total = RM104

Manufacturer

Cost = RM100 Value added = RM50 Total = RM150 GST (4%) = RM6 Total = RM156

Final consumer

Cost to consumer = RM156

GST to goverment
Table 1: example how GST work

b) Manufacturing

Manufacturing includes all steps necessary to convert raw materials, components, or part into finished goods that meet a customers expectations or specifications. Manufacturing commonly employs a man- machine setup with division of labor in large scale production. When good and services tax are implemented, manufacturing factor will be affected directly by GST. The effect would involve the aspect:

Purchase materials

Sales

Other

Imports

Export