UNIQUENESS OF GST IN MALAYSIA COMPARED TO OTHER COUNTRIES AND DISTRIBUTION 3 CATEGORY OF GST (BUDGET 2016)

Malaysia's financial position is much better than in other producing countries such as Venezuela, Nigeria, Iran and Russia that its earnings adversely affected by falling crude oil prices. Diversified economy, Goods and Services Tax (GST) and the rationalization of subsidies have helped provide a number of contributions to offset the income, economist said. Besides , the demand for domestic stocks, coupled with greater private investment in the country and the contribution of the sector manufacturing, construction, agriculture and services including tourism also contributes to the national income, they said. GST is a prime example of not only introducing a pragmatic policy but timely for tax widespread use in helping reduce Malaysia's dependence on dividends from Petronas and petroleum-related revenue. GST collection is expected to increase to RM39 billion in 2016 from RM27 billion between April 2015, when executed, and in October 2015 when the Budget 2016 tabled. This contrasts with the contribution from Petronas and oil-related sectors are expected to decline to RM31.7 billion in 2016 from RM44 billion in 2015. An economist from MIDF Research said that the percentage of oil-related revenue to total revenue of the government is expected to shrink further to 14 % this year from an estimated 20% in 2015. Despite the decline in oil-related revenue, he said the country's fiscal deficit will not be affected much, following the government's ongoing efforts to become less dependent on oil revenue. If the government fails to reduce its dependence on oil prices, fiscal and financial markets we will be in a worse nowadays .Malaysia will also experience a revenue shortfall of approximately RM36 billion in 2016, which translates into a fiscal deficit of about 6.1 per cent. The World Bank said Malaysia is a country with limited reliance on commodity exports fuel compared to other countries such as Algeria, Kuwait, Sudan and Venezuela that exports are at or above 80 % . Vice President and Head of Retail Research, Affin Hwang Investment Bank, Dr Nazri Khan said the drop in oil prices have a major impact on major oil producers such as Saudi Arabia, which depends on oil for 70 % of its revenue and Nigeria, the largest oil producer in Africa , In fact, due to the fall in world oil prices, the six Gulf countries in the GCC (Gulf Cooperation Council), namely Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and the United Arab Emirates have agreed to implement the VAT (value added tax, the same as the GST) following the collapse oil prices and the high military costs. However, Malaysia is no longer a major oil producer with the government's efforts to reduce dependence on the oil .Negara has shifted more towards non-oil revenue and the implementation of the GST, among others, helped to partially mitigate the impact of oil price volatility. Brent crude, the global benchmark for crude oil, down three per cent to US $ 30.43 a barrel on Tuesday from the previous day, the lowest level since April 2004. In this case also, Petronas reportedly budgeted oil prices could reach an average of US $ 30 a barrel this year and will be difficult for the oil company in two to three years. According to Nazri Khan, the contribution of oil revenue fell to 20 % under the current administration of as high as 40 per cent in the previous administration. Therefore, he said, the government has managed to reduce its dependence on oil towards a more diversified revenue sources and stable, thereby helping the economy of affected much due to falling crude oil prices. For the GST, he said MIDF Research estimates it can contribute additional revenue of RM20.5 billion for the year. The result will remain the same under the Sales and Service Tax (SST). He said the additional tax revenue to help reduce the impact of lower oil revenues earned last year and if it were not for the implementation of the GST, Malaysia could potentially see a higher fiscal deficit in 2015 and 2016. Nazri Khan also agreed with the government to modify the Budget 2016 which he believes to be the norm in other countries due to reduced revenues caused by falling oil prices. He said adjustment means assumptions before the price of oil at US $ 48 per barrel is no longer tenable and that appropriate changes must be implemented .Perdana Minister has announced that it will modify the budget last week to reflect the realistic situation of global challenges such as the economic slowdown in China and falling prices oil. Recognizing the challenges as outside of government control, Dato Sri Najib Razak said the renovation budget was a pragmatic approach by the government to ensure spending more accurate. Changes would involve, among other things, measures to optimize spending and stimulate domestic demand as well as the role government-linked companies to invest more in the country. Meanwhile, Maybank Investment Bank said in a research note today said the country's oil and gas industry stronger now compared to last year as participants have adjusted the position of the low oil price environment through rationalization of costs, capital discipline and control of cash flow. He said cost reduction and cash flow remains a key initiative prudent industry players this year, while the financial resilience to the quality of attention in the current situation. In addition, Budget 2016 presented by Dato 'Sri Najib Razak on October 23, 2015 has clarified some matters related to Goods and Services Tax (GST) and announced improvements to the tax system. According to Dato 'Sri Najib, nearly 400 thousand companies are registered with the GST, with the surrender or submission compliance rate reached over 90 %. The Government's decision to implement the GST is right, even more so due to the fall in oil prices to over 50% from the level of 100 dollars before. 1) GST on prepaid cards for Telecommunications Services Malaysians who use prepaid telecommunications services will receive a rebate equal to the amount of tax paid, which will be credited directly into their prepaid service account. This step is to begin January 1, 2016 until December 31, 2016. The income tax rate also saw an increase for certain income categories. Here are two categories of income taxes and rates which was announced in Budget 2016: a) Revenues from RM600,001 to RM1,000,000 increased to 26% from 25% b) Income exceeding RM1,000,000 was increased to 28% from 25%. Also mentioned in the Budget 2016 is related to the income tax exemption limit for the M40. Generally, the M40 is a group of people who earn around RM3,860 to RM8,320 per month. 1. Raising the tax exemption limit to RM2,000 for each child aged under 18 years from assessment 2016. 2. Raise the limit to RM4,000 tax relief for individual taxpayers whose spouse has no income. 3. Introducing a new tax relief of RM1,500 to RM1,500 for mothers and fathers to ease of maintenance child support parents. 4. Raising the tax exemption limit to RM8,000 for each child aged over 18 years who are studying at universities in and outside the country began to tax the interpretation of 2016. 5. Raise the limit to RM8,000 tax relief for parents of children with disabilities who are pursuing their studies locally and abroad from year of assessment 2016. 6. Income tax relief is given on contributions Social security schemes from year of assessment 2016 7.Feasibility contribution was increased to RM4,000 compared to RM3,000 per month. 2) Exclusion of GST for Rural Air Services Air passenger transport is the main mode of transportation for rural residents, in Sabah and Sarawak and Labuan. Thus, the domestic air passenger transport services on the route in economy class Rural Air Services exempted from GST. 3) Release of GST and the Cash Rebates And here are some suggestions on tax relief as well as cash rebates GST for entrepreneurs and companies:  GST relief for imports of the goods which have been exported temporarily for the purposes of promotion, research or exhibition.  Release of GST import of equipment worth re-exported temporarily for the purpose of rental and lease such as oil rigs and floating platforms.  Release of GST for the procurement of equipment, training of skills training centers under the National Skills Development Act 2006.  The cash rebate equivalent to the amount of GST paid will be credited to users for activation from January 1st 2016 until December 2016.