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Which is more beneficial to consumers? Zero rated or exempt supplies?

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Which is more beneficial to consumers? Zero rated or exempt supplies?

Post by Admin on Sat Sep 27, 2014 9:39 pm

From the customer's point of view, zero rated and exempt supply seem to be the same but are they?

Supplier of zero rated supplies charged GST at 0% but can claim all input tax. Customer who buys zero rated supplies do not pay any GST. In this instance, effectively the GST cost is borne by the government.

Suppliers of exempt supplies do not charge consumers GST and at the same time cannot claim any input GST. In this case suppliers have bear the cost of GST. When this happens, the cost of the exempt suppliers will increase with the implementation of GST and hence their profit will decrease. A normal business enterprise that strives to maintain and increase profit will most likely transfer the increase in cost to consumers in the form of price increase.

The government recognize that exempt and zero rated goods and services are essential to the public and tries to ease the burden of the public by making it zero rated and exempt. However, in making a supply exempt, the government tries to transfer the cost of GST to the suppliers. Whether the suppliers absorbs the GST and not transfer the price to consumer is left to be seen but the prediction does not look optimistic.


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