CHAPTER
1: INTRODUCTION
1.1 CHAPTER
DESCRIPTION
This first chapter
consists of an introduction and background to the study towards the effects of
GST towards consumer. This chapter also
includes the problem statement, objectives of the study. Besides that, it also briefly discusses the
significance of the study and limitations during the process in completing this
study.
1.2 INTRODUCTION
GST means Goods and
Services Tax and it is a consumption tax based on the value-added concept. GST
Malaysia is imposed on goods and services at every production and distribution
stage in the supply chain including importation of goods and services. GST will
replace the present consumption tax comprising the sales tax and the service
tax (SST).The difference between GST and the present consumption tax is in
terms of its scope of charge which is more comprehensive, inclusive of the
manufacturing and distribution stages as well as providing a tax credit claim
for GST paid on business inputs. When compared with the present consumption tax
system, the sales tax is imposed only at the manufacturing stage that is at the
time when the goods are manufactured or when the goods are imported. On the
other hand, service tax is imposed on specific services at the time when the
services are provided to the consumer.
1.3 BACKGROUND
OF THE STUDY
The concept behind GST
was invented by a French tax official in the 1950s. In some countries it is
known as VAT, or Value-Added Tax. Today, more than 160 nations, including the
European Union and Asian countries such as Sri Lanka, Singapore and China
practice this form of taxation. Roughly 90 percent of the world's populations
live in countries with VAT or GST. Goods and Services Tax (GST Malaysia) will
be implemented with effective from 1 April 2015 and GST rate is fixed at 6 (%)
per cent. Sales tax and service tax will
be abolished. Currently, Sales tax and service tax rates are 10% and 6%
respectively.
The introduction of GST
is part of the Government's tax reform programmed to enhance the efficiency and
effectiveness of the existing taxation system. GST is proven to be a better tax
system as it is more effective, efficient and transparent and business friendly
and could spur economic growth as well as increase competitiveness in the
global market. GST is capable of generating a more stable source of revenue to
the nation because it is less susceptible to economic fluctuations. It is
important to replace the existing SST in order to eliminate its inherent
weaknesses such as cascading and compounding effects, transfer pricing and
value shifting, no complete relief on goods exported, discourage vertical
integration, administrative bureaucratic red tape, classification issues and
etc.
1.4 PROBLEM
STATEMENT
This research is
conducted to study the factors that affect consumption and investment in
Malaysia. The determinants effects
studied for GST is the consumer decision, consumer price index (CPI) and
inflation rate. The Malaysian people have attracted the attention of various
research groups in different disciplines.
This group has become the target of research in similar form, mainly due
to this group of the population comprises of the large demographic segment of
consumers with high spending power. The
reason is consumer purchasing behavior might be influenced by some other
factors such as gender, level of income of the individual and quality of
environment the individual is living and others.
Malaysia’s population
has just touched 30 million. However, only about 5.6% or 1.7 million of the country’s
population pay income tax. This comes to just 14% of the 12 million employed
Malaysians. This is very low and means that 5.6% of the country is supporting
the other 94.4%. No country can sustain its growth and development on this
drastically imbalanced ratio.
Everyone has to share
this burden of paying tax. The burden should not be placed on the shoulders of
just 5.6% of the population. So how do we do this and make sure that some
people who are less financially capable are not burdened while those who have
the means end up paying pittance? Because Malaysians are so focused on opposing
the GST, no one is bothering to look at how to make it fair or fairer and not
become a burden to the lower income Malaysians. This, I believe, is what
politicians should be looking at because there is no way the government is not
going to implement the GST unless we want to see Malaysia going broke 10 years
or so from now.
1.5 OBJECTIVES
OF THE STUDY
1.5.1
To examine the relationship between each
of independent variables with dependent variable
1.5.2
To study which is the most significant
variable that effect of GST towards consumer
1.6 RESEARCH
QUESTIONS
Research questions are a statement of the purpose of
a study. Research questions is about
what the researcher want to investigate and study besides the questions become
a beginning in doing the research and have to be answer in the end of the
study.
This paper has a several questions that researcher
want to find out the answer. The questions include:
i.
What is the relationship between GST and
Consumer Decision?
ii.
What is the effect GST towards the
Inflation Rate?
iii.
What is the impact between GST with the
Consumer Price Index (CPI)?
1.7 RESEARCH
HYPOTHESES
In this study, the
hypotheses were built to examine the relationship between independent variable
and dependent variable. The hypothesis
can be defined as a logically conjectured relationship between two or more
variables expressed in the form of a testable statement. There are two types of hypotheses. The first type is null hypothesis (H0) and
the other hypothesis is known as alternative hypothesis (Ha). Null hypothesis is a proposition that states
a definitive, exact relationship between two variables. In general, the null statement is expressed
as no (significant) relationship between two variables or no (significant)
difference between two groups. The
hypothesis will come out such as follows:
INFLATION RATE
H0 = There is no
significant relationship between inflation rate and GST
Ha = There is a
significant relationship between inflation rate and GST
CONSUMER PRICE INDEX
(CPI)
H0 = There is no
significant relationship between CPI and GST
Ha = There is a
significant relationship between CPI and GST
CONSUMER DECISION
H0 = There is no
significant relationship between consumer decision and GST
Ha = There is a
significant relationship between consumer decision and GST
1.8 SIGNIFICANCE OF THE STUDY
The research is
significant to:
i.
As a researcher:
Researcher
can gain a lot of information together with brilliant knowledge that can be
used in variety situation.
ii.
To student:
The
research can help the other students who want to study about GST, so they can
use this research as a reference or as an example.
iii.
To public:
People
can get extra information that can be used as a guide to them involve in the
investment in the future or as general knowledge.
iv.
To consumer:
Consumer
can get extra information that can be used as a guide to them involve in the
investment in the future or as general knowledge.
1.9 SCOPES
OF THE STUDY
The study only focuses on the effects of GST towards
consumer. The scope of the study
involves the relationship between consumer decision, consumer price index (CPI)
and inflation rate and GST as the dependent variable.
1.10 LIMITATIONS
OF THE STUDY
The scope of this study is to explain the effects of
GST towards consumer in general. There
are several independent variables that the statistical could be found from the
website. Moreover, through this managed,
people managed to see whether there is a relationship between dependent
variable and independent variable and does the correlation really exist between
them.
However, there are also a few of limitation in order
to conduct this study, such as:
a) Financial
constraint
Financial sources are limited since this research
will be conduct by a single person. The
researcher will facing with this constraint in order to conduct this study.
b) Lack
of knowledge and information
Information sometimes is limited in this research
since this topic is general, so the knowledge and information must be valid and
updated.
c) Lack
of data
Data sometimes is limited in this research since
this topic is general, so the data must valid and updated.
