PROSIDING PERKEM KE-11, (2016) 27 – 34 ISSN: 2231-962X Persidangan Kebangsaan Ekonomi Malaysia ke-11 (PERKEM KE-11), Kelestarian Dasar Awam, Daya Tahan Ekonomi dan Kesejahteraan Sejagat, Hotel Bangi-Putrajaya, Selangor, 27 - 28 Julai 2016 Understanding of Goods and Services Tax (GST) and Spending Behavior among Malaysian Consumers Shafie Mohamed Zabri Department of Business Management Faculty of Technology Management and Business Universiti Tun Hussein Onn Malaysia E-mail: shafie@uthm.edu.my Kamilah Ahmad Department of Production and Operation Management Faculty of Technology Management and Business Universiti Tun Hussein Onn Malaysia E-mail: kamilah@uthm.edu.my Tham Gen He Department of Technology and Management Faculty of Technology Management and Business Universiti Tun Hussein Onn Malaysia E-mail: ap120455@siswa.uthm.edu.my ABSTRACT Generally, tax is recognized as one of the main sources of government’s income. Taxes can be classified into direct and indirect taxes. Corporate Tax, Personal Income Tax, Real Property Gains Tax, Estate Duty and Stamp Duty are an examples of direct taxes whereas indirect taxes consist of import duties, export duties, excise duties, sales tax and service tax. Goods and services tax (GST) is an example of indirect tax. Revenues from GST form a significant portion of government income in many countries. Despite the increasing popularity and success of GST implementation around the world, Malaysian citizens are not entirely convinced with the new tax regime which caused by their lower level of understanding of the benefits behind the implementation of GST. Therefore, this study was conducted to investigate the level of understanding of GST and also examine the relationship between the understanding of GST and spending behavior among consumers in Batu Pahat, Johor. Questionnaire-based survey was conducted to obtain the data. Descriptive and correlation analyses were used to test the hypotheses constructed. The result shows that the level of understanding towards GST among consumers in Batu Pahat is at moderate level. Besides, significant findings showed that changes in spending behavior among consumers in this study after the implementation of GST. It was also found that there was no significant relationship between the level of understanding of GST and spending behavior among consumers involved in this study. The results of this study were believed to be able to serve as feedback for government, practitioner and other related parties in understanding the behavioral changes among consumers caused by the implementation of GST. Keywords: Goods and Services Tax (GST), Spending Behavior INTRODUCTION Goods and Services Tax (GST, hereafter) is a broad based consumption tax on goods and services. It is a form of indirect tax in which consumers pay taxes as they purchase goods and services. Therefore, GST is a tax imposed based on spending amount unlike income tax where it is taxed based on the amount of income earned (Rashid, Mohammed & Saheh, 2005). In fact, GST is not a new tax, it is actually a tax replacing the sales and service tax. In contrast to the existing sales and services tax, GST is a multi-stage tax. This is due to the payment of tax is made in every stage by the intermediaries in the production and distribution process. In other words, GST is imposed at every level of production and distribution chain until the final consumer (Mansor & Ilias, 2013). Therefore, GST is a much fairer tax system that will detect tax evasion (Choong, 2006). According to International Monetary Fund (IMF), the introduction of GST will increase the efficiency of tax system and in the end raises the collection of tax. It was believed that the introduction of GST will provide the government with the brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by UTHM Institutional Repository