GST is a broad based consumption tax which will generally be applicable on all goods and services.

This means that we pay tax only on what we consume. To ensure the tax is only imposed once, any registered business charging GST will be allowed to offset the GST it pays against the tax it collects before remitting the balance to the government. This is known as an input tax credit mechanism it generally allows businesses to operate with no tax cost. The final 6% tax is borne by the end consumer. Implementing GST First, lets consider how the current consumption tax regime works. Most will be familiar with service tax which is charged at 6% on selected services, for example those provided by hotels and restaurants. A second consumption tax, possibly less familiar to many, is sales tax which is charged on certain manufactured or imported goods and is, in many instances paid before the goods reach the consumer. Sales tax is in some circumstances hidden from the consumer. For example a carbonated drink is subject to a sales tax of 10%, but the tax is not generally itemised to the end user. If the drink costs RM11, RM1 is tax. However, as far as the consumer is aware, he is buying a drink for RM11, not RM10 + tax.