GST..confuse?


Hey guys,

Do you know by 2011 consumers have to pay GST?

What is GST?

Goods and services tax (GST) or in some countries is known as value-added tax (VAT), is a consumption tax levied on the sale of goods and services. Personal end-consumers of products and services cannot recover GST or VAT on purchases. In this way, the total tax levied is a fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. GST or VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.

The difference from conventional sales tax is that it is levied on every business as a fraction of the price of each sale they make, but they are in turn reimbursed GST/VAT on their purchases, hence the tax is applied to the value of the goods that has been added.

My little experience when shopping overseas shows that I had to reimbursed my GST in the airport upon returning home and worst of all, the office is situated in a far remote area of the airport as if not to allow easy access to customers in a hurry.

What if no GST/VAT? Let study this example. Without a GST/VAT, the situation is like this.

A pencil manufacturer spends $1 on raw materials to make a pencil.
The pencil is sold to a retailer for $1.20.
The retailer then sells the pencil to a consumer for $1.50.

By adding on a 10% GST/VAT, the situation will be like this:

The pencil manufacturer pays $1.10 for the raw materials.
The pencil manufacturer charges the retailer $1.32 and pays the government $0.02, leaving the same profit of $0.20. The retailer charges the consumer $1.65 and pays the government $0.03, leaving the same profit of $0.30. So the consumer has paid 10% extra.

The businesses have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the difference between what they collect in GST/VAT and what they spend in GST/VAT.

So at the end of the day, the customers have to bear the tax. Well, everyone is the customer. You may be the employer to your employees but when you buy something, your are consumers…So, we all have to pay….then. What say you? Give your opinion?

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