Let me try to break this down for you. Also, don't be fooled by the word play, "raw material cost DOES NOT INCREASE, as a result of gst". Yes the raw material is $x no change I agree, but you used to buy it at $x +5% now you have to buy it at $x +7%, how can that not increase your business cost? we are talking honest trader here and cost will definitely increase, it is so simple.
../azul123
did you read my example to cyrn or not
i quote once again
* Most businesses register for GST to claim back the GST incurred on their business purchases.
* When GST paid exceeds GST collected, the difference can be claimed from IRAS as a GST refund.
* When GST collected exceeds GST paid, you have to pay the difference to IRAS.
* When GST rate increase, it may make business sense to voluntarily register to collect GST in order to claim back GST incurred on business purchases.
if i pay $321 for my raw materials ($300 base before gst)
comapred to $315 for my raw materials (same base before gst) in the past
based on the above quote, i should not worry about the extra $6 and pass it on to consumers
if i was selling my product at $630 in the past, i just sell it at $642 now (both $600 base)
so in the PAST, i collected $30 gst for the gahment, and i paid $15 to the supplier
i end up getting $15 more actually, but based on law i have to give it to gahment. so after balancing accounts, my profits are $630 - $315 - $15 = $300
NOW, with 7% gst, i collect $42 gst for the gahment, i pay $21 to the supplier, i have collected $21 for the gahment net balance, so i pay to gahment. after balancing accounts, my profits are $642 - $321 - $21 = $300
i still earn the same profits, and i do not need to factor in the costs from my profits
now taking YOUR idea, i should just stack $300 on top of what i pay the supplier ($321).. that's $621 and then slap a 7% extra on it.
that's about $665. so i happily tell my customers, price increase, and tada, i pass it on to you, it's gahment's fault.
in actuality? i collect about $44 gst for the gahment, i paid $21 to the supplier.. i collect $23 net.. which i must give to gahment.. so balance already is $665 - $321 - $23 = $321
wow, my profits have increased! i am a happy lobster because i have cheated the people and made them blame the gahment. unless you can point out any problems with the math, then this is solid proof that all things else being equal (i.e. there is not change in raw material pricing, and i do not decide to increase my profit).. no businesses will be affected, since they can generate the same profit because of the claimable portion.