IT Dependence

As IT is becoming more and more integrated into our daily lives, we may sometimes take it for granted. IT actually has a myriad of contributions unseen to the younger generation of today - because they know nothing of a world without IT. The implementation of IT goes hand in hand with the need to grow, and our Malaysian government is one to take on this opportunity by slowly digitizing their data and moving towards online transactions within the different ministries.

There are many examples which we can look at, but what I would like to shift our attention to is how IT is an enabler to some of our Malaysian government's policies - specifically in case, the Goods and Services Tax (GST). The concept is fairly simple - 6% on all (almost all, of course after excluding the 0 rated and exempted categories - but for now to simplify, we assume all is standard rated at 6%) items traded in the market as either 'Goods' or 'Services'. This is the net end effect to all users (in theory).

Each item is charged with a tax value

But here's where it gets complicated. Items are rarely ever coming straight from the source to the consumer. It will always change hands at least 2 or 3 times through channels such as wholesalers and distributors. The government has set in place (emulating the implementation of GST in other countries, of course) the mechanism involving Input & Output Tax. Sound alien to you? Let me try and explain in simple terms - Input Tax is the amount of 'tax' recorded coming in to the company and Output Tax is the amount of 'tax' recorded out. These 'middle men' (e.g. the wholesalers, traders, distributors) will act as the government's agents to help transfer the tax over to the end user by charging their customers (Output Tax) and being able to claim the tax imposed on to them (Input Tax). The net effect to these 'middle men' should be zero, they will not bear the 6% tax, it is meant for the end user to bear. 

So... with thousands and thousands of transactions a day, how do these middle men track all their taxes? You tell me - IT? Yes. In order to fully implement the GST policies, IT is a must. The middle men must be able to clearly record their Inputs and Outputs - and only claim the difference from the government. The use of IT does not stop there. In order to be able to claim the tax difference from the government, these middle men need to have a valid GST Registration Number - and this number needs to be clearly shown on their Invoice to the customers. Again, digitized data allows the process to run as planned. 

The Cash Register records all outgoing transactions, and outputs a Tax Invoice to customers. It can also be linked to the organisation's finance system for auto-calculation of (Input-Output) Tax for claiming purposes.

Customers (end users) also benefit from IT as they will be able to cross-check this number in the government's portal to see whether it is truly a valid number. Why would they go through the hastle of checking?? Basically, if the number is invalid - the middle man is not able (by law) to charge the tax and is required to bear the tax cost i.e. he is not able to transfer the tax to the customer. For high valued spend items, a 6% tax may be quite hefty - I'm sure you would like to check whether or not you are being rightly charged....right?

The mechanism gets more complicated and the need for IT more apparent when we dive into further details such as having some items exempted, and some 0 rated. It then looks at details such as the source of the item, the intended recipient and the intended purpose of use etc.

The point I'm trying to make here.. is that we are dependent on IT. It is no longer just a means to help us work more efficiently, it is THE means for us to work. Think about it.. can you survive in today's world without the use of IT? We are (especially the younger generations) becoming more and more dependent.