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24 Oct 2020  (563 Views) 
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Movement for change


Difference between GST and sales tax
I dislike GST which is a "bits and pieces" tax. I prefer a sales tax.

What is the difference?

GST is a value added tax. It is levied on every transaction. When a product flows through the supply chain, it is taxed at each stage, but the party is allowed to deduct the GST that has already been paid earlier, so it has to pay only the difference.

There is a lot of accounting work needed to compute the "output GST" and to deduct the "input GST" at each stage.  Although large businesses can use computer systems to do the accounting, it still requires work to handle the input of the transactions.

I describe this as the cost of GST accounting. Each business has to employ accounting staff to do the accounting work. It is horrendous.

What about a sales tax?

This takes much less work. The government can decide on the business establishments that need to collect the tax and also the items that need to be taxed. 

Usually, the sales tax is collected at the final stage and is not collected at every stage of the supply chain. 

For example, the sales tax can be computed at hotels, restaurants and purchase of expensive items like cars, houses and luxury goods. It does not need to be collected for medicines, education fees, health care and purchases from the markets.

A sales tax can be made more targeted at items that the buyers can afford. It does not need to be levied on items that are bought by poor people.

I support a sales tax that is collected at the final stage of the supply chain. I am against a GST that is levied at every stage of the supply chain and that is applied on every item of goods and services. 

Do you agree that a sales tax makes more sense and is less costly to administer?

Tan Kin Lian
 


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