After three years since the implementation of 6% GST, the government has come to the decision to reduce it to 0% from Friday, 1st June 2018 onwards to fulfill one of their promises based on the manifesto presented during GE14.
There has been a lot of talk on the topic, and I’m sure everyone like myself will have a lot of questions on what the next few years will look like for us. To understand the whole situation better, we got a few experts to weigh in and guide us through the changes: Andy Gan, an associate member of Chartered Institute of Management Accountant (CIMA) and Chartered Global Management Accountants (CGMA) who also founded an IGCSE Centre, Twins Education, as well as Ian Wong, who is a licensed financial planner.
First and foremost, if you weren’t so sure about the tax system before, it’s time to get educated! Basically, the Goods and Services Tax (GST) is a form of indirect taxation charged to consumers and in some countries it’s referred to as Value-Added Tax (VAT). GST is a broad consumption tax that covers all industries in the economy and it is applied to people like you and me on our daily spendings like eating out or buying a pair of new shoes.
The sharp rise in costs after GST was felt by many of us and, according to Ian Wong, there are two main reasons to explain what happened, “Goods that previously did not incur a Service Tax suddenly had to charge GST,” and “Goods that were previously factoring in the Sales Tax of 10%, maintained the same price even after the removal of the Sales Tax. Then these businesses slapped on the 6% GST. In this situation, the 6% GST is actually a lower tax, and should have actually resulted in a reduction in prices.” This point makes total sense because there are businesses out there that will cheat their way to earn extra bucks whether we like it or not, it’s important to stay woke and recognise where exactly your money is going.