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  • Tax Assignment - Q

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    ericfoo5455
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    GST works by allowing businesses to deduct input tax paid on purchases from output tax charged to customers. This offsetting mechanism ensures GST paid is based on the value added at each stage of production and distribution. Under GST, the supplier pays tax on its sale price, then each subsequent business in the supply chain pays tax on the value it adds until the full tax is ultimately paid by the final consumer.

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    GST works by allowing businesses to deduct input tax paid on purchases from output tax charged to customers. This offsetting mechanism ensures GST paid is based on the value added at each stage of production and distribution. Under GST, the supplier pays tax on its sale price, then each subsequent business in the supply chain pays tax on the value it adds until the full tax is ultimately paid by the final consumer.

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    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    9 views1 page

    Tax Assignment - Q

    Uploaded by

    ericfoo5455
    GST works by allowing businesses to deduct input tax paid on purchases from output tax charged to customers. This offsetting mechanism ensures GST paid is based on the value added at each stage of production and distribution. Under GST, the supplier pays tax on its sale price, then each subsequent business in the supply chain pays tax on the value it adds until the full tax is ultimately paid by the final consumer.

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    of 1

    How GST works

    GST paid on purchases (are called “input tax”) shall be deducted from the GST charged to
    customers (called “output tax”). This offsetting mechanism is to ensure GST paid by
    businesses is incremental, based on value-added basis. This can be seen in the simple
    illustration below.

    How does GST work? GST's mechanism in the supply chain for GST calculations and tax in
    Malaysia, for budget 2010

    1. Let’s say the selling price from the supplier is RM100, and where 4% GST is charged.
    2. The supplier then charges the tax to the manufacturer, where you can see “value
    added” is pushed on.
    3. When the distributor receives and pays for the tax, it’s transferred to the consumer at
    the end price.

    Payment of GST to the Government

    1. Supplier will pay RM4 (output tax) to the Government.


    2. Manufacturer will pay RM4 (output tax of RM8 less input tax of RM4) to the
    Government.
    3. Distributor will pay RM2 (output tax of RM10 less input tax of RM8) to the
    Government.

    At the end of the day, consumers are the ones who are paying for GST of RM10, and the
    Government, who eventually receives total GST of RM10.

    -1-

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