There are many known effects of GST on SMEs. One of
them is the difficulty to comply with various different taxes, restrictions in
the form of complicated regulations which is worsen by SMEs limited resources
and lack of expertise  (Pope &
Abdul-Jabbar, 2008). GST was seen as a burden to SMEs in terms of tax
compliance costs. According to Palil et al., (2013), GST implementation upon
SMEs are higher and regressive and more so towards businesses involved in major
taxable services and products and also exempted supplies (Palil & Ibrahim,
2012). The cost of compliance is categorised into two, one is the start-up cost
and another is a recurring cost which is taxed annually (Brown & Marsden,
2002). GST costs covers an additional costs of purchasing new office strat-up
supplies such as computers, cost of hiring, products distribution and services,
training, book keeping requirements. Aslo, enterprise owners would incur
additional taxes by the time spent on managing activities related to GST for
example, setting up paperwork for tax collection progress.

            In
a study about GST compliance cost in Queensland’s service industry, it is found
that average cost incurred for new business start-ups is about $5,61015 for
each businesses while the average recurring costs such as to replace old
furniture, upgrading payment system would be as much as $5,600 (Breen,
Bergin-Seers & Sims, 2002). The GST compliance cost is an long-term burden
for SMEs. Other impact is the problem of late payment by businesses’ debtors
which subsequently created additional influx of cash flow conflict, suffered
tremendously by the time firms have to pay their GST commitments. Rametse
(2010) in his research of 868 SMEs revealed that GST implementation posed a
heavy burden towards firms management and extra financial crisis for new
start-ups. He also found that existing SMEs need to pay a hefty sum of $7,888 in
terms of incurred costs spent on office upgrading supplies.

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            GST
not only contibutes towards financial burden among SMEs, it also a time
consuming process whereby a total of 131 hours was spent seeking expert’s
advise on accounting and IT management, all cost about $2,882 and another 58
hours or equivalent to $1,276 in preparing for GST. Tran-Nam (2000) revealed
that the implementation of GST costs in Australia were doubled the amount of
the first opening year with GST, about 4.5 billion surplus which have damaging
effect on overall economic condition. Method of GST management which involved
computing and management should be introduced (Chan, 2009). In the local
context, prior to the implementation of GST, forecasted compliance costs was
about RM28,456 (Palil, et. al., 2013). This includes internal costs billed
annually totatling up to RM16,772 and external cost of RM7,388 which will be
paid by SMEs.

            These
figures could increase due to GST tax external sourcing includes planning and
computation tax. Majority of firms expected an additional costs in both
external and internal spending after GST was implemented. In regards to values
of assets and sales, higher compliance cost was faced by SMEs than bigger firms
(Weichenrieder, 2007). A total of ?67,995 was pent by SMEs involved in
transactions which includes VAT in Nigeria (Eragbhe & Modugu, 2014). VAT ia
another type of taxes charged towards consumers and firms and is Nigeris, it is
charged higher than other types of taxes, causing immense burden to SMEs.

 

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