Goods and Services Tax vs. Sales and Services Tax: Different Structures Impact on the Households’ Expenditure Pattern

Siti Nur’amalina Syeddin, Nor Zarina Mohd Salim, Hafini Suhana Ithnin, Noormahayu Mohd Nasir and Zarul Azhar Nasir
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Siti Nur’amalina Syeddin: Faculty of Business and Management, Universiti Teknologi MARA Perak Branch, Malaysia
Nor Zarina Mohd Salim: Faculty of Business and Management, Universiti Teknologi MARA Perak Branch, Malaysia
Hafini Suhana Ithnin: Faculty of Business and Management, Universiti Teknologi MARA Perak Branch, Malaysia
Noormahayu Mohd Nasir: Faculty of Business and Management, Universiti Teknologi MARA Perak Branch, Malaysia
Zarul Azhar Nasir: Faculty of Business and Management, Universiti Teknologi MARA Perak Branch, Malaysia

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 9, 951-963

Abstract: The implementation of Goods and Services Tax (GST) in April 2015 has received criticism due to the significant increase in prices of goods and services. To contain this issue, the Malaysian government has decided to replace GST with the former SST system effective September 2018. However, this decision leaves the public with more questions regarding its impacts on households’ expenditures. To address these questions, this study is outlined to estimate the impacts of GST rates and SST on households’ expenditures. The method use for this study is input-output model in which each of tax variables were identified as items “taxes on products (domestic)†in the input-output table. Findings reveal that GST rates tend to reduce prices, which results in the reduction of expenditures for different household groups. In contrast to GST, SST is estimated to bring undesirable impacts for the households’ expenditure. The HES suggests that the main type of expenditures undertaken by households are on Food & Non-Alcoholic Beverages and Housing, Water & Fuel, the increase in production cost of these groups of goods and services will lead to price hikes that result in the rising cost of living. Particularly, the findings indicate that every different household group (Bumiputera by strata, non-Bumiputera by strata, T20, M40 and B40) are heavily affected as most of the expenditures increment are sourced from Food & Non-Alcoholic Beverages. Yet, the findings from this study disregard the real situation because the impacts of other cost-push components are not taken into account.

Date: 2024
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