Abstract

Malaysia has announced the abolishment of Goods and Services Tax (GST) effective from 1 June 2018 and replaced with Sales and Service Tax (SST) in September 2018. The SST is considered as a preferred taxation system among SMEs as it imposes tax at only one level compared to the GST where tax was imposed at every level, from manufacturers to wholesalers, retailers and consumers. Hence, this research tend to identify the problems in GST implementation faced by SMEs, to reveal the differences between demographic factors (business size and business experience) with problems in GST implementation and to determine the relationship between GST awareness and problems in GST implementation faced by SMEs, which lead to the withdrawal of GST in Malaysia. Eighty-three SMEs in Selangor volunteered to answer the questionnaire. The results indicated that GST awareness and business size have significant relationships and differences with problems in GST implementation faced by SMEs, which lead to the GST abolishment. However, business experiences having no significant differences with problems in GST implementation.

Highlights

  • In April 2015, Malaysia replaced the sales and service tax (SST) with a Goods and Services Tax (GST) to broaden the tax base and reduce the country’s heavy reliance on oil revenue, which made up more than 40 per cent of the federal government revenue in 2014 (Ching et al, 2018)

  • GST Awareness Problems in GST implementation faced by small and medium enterprises (SMEs) that lead to GST withdrawal

  • This study is conducted with three objectives; to identify the main problems in GST implementation faced by SMEs that lead to GST withdrawal, to investigate the differences between demographic factors and problems in GST implementation faced by SMEs problems and to identify the relationship between GST awareness with problems in GST implementation faced by SME

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Summary

Introduction

In April 2015, Malaysia replaced the sales and service tax (SST) with a Goods and Services Tax (GST) to broaden the tax base and reduce the country’s heavy reliance on oil revenue, which made up more than 40 per cent of the federal government revenue in 2014 (Ching et al, 2018). According to Safini (2018), SST 2.0 is a preferred taxation system among small and medium enterprises (SMEs) as it imposes tax at only one level compared to the GST where tax was imposed at every level, from manufacturers to wholesalers, retailers and consumers. GST claimed as a tax system, which can give benefits to many people, more efficient, customer friendly, overcome weakness of double taxation and can reduce bureaucracy (Shamsuddin et al, 2016). There was an argument that the GST was a major factor in price increases found receptive ears among Malaysians (Narayanan, 2018)

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