Zero rate for GST from June 1

Pakatan Harapan has pledged to remove GST within 100 days as one of its key election promises


The government has decided “a zero rate” for the Goods and Services Tax (GST) effective June 1, 2018, formally ending the widely unpopular 6% consumption tax that has largely influenced voter sentiments during the recent polls.

The Ministry of Finance (MoF) said effective June 1, 2018, the GST rate will be set at zero and it will be implemented nationwide until further notice.

“MoF has determined that the supply of goods and services made within Malaysia as well as goods and services imported and taxed with the GST at a standard rate of 6% will be imposed on GST at 0%,” it said in a statement yesterday.

Likewise, there is no change for goods which are already exempted from the GST as provided under the Goods and Services Tax (Exempt Supply) Order 2014.

The announcement came almost a week after the Pakatan Harapan coalition ended the Barisan Nasional’s 61-year rule in what many had labelled a huge blow to the latter. Pakatan Harapan had pledged to remove the GST within 100 days as one of its key election promises during the recently concluded 14th General Election.

The government is expected to reintroduce the Sales and Services Tax (SST), a scheme used before the GST. “All registered traders must follow the decision of the zero rate now. At the same time, registered businesses are still subjected to all current regulations,” MoF said.

MoF said traders must also adhere to the current practice of issuing tax invoices, submission of tax statements and claiming of input tax credit. “Traders also need to ensure that the prices of goods and services are in compliance with the Price Control and Anti-Profiteering Act 2011.”

Malaysian Tax Research Foundation chairman of the board of trustees SM Thanneermalai believes that the GST collection between May 9 to May 30 would continue.

“Since the tax will be zero rated beginning June 1 this year, any collection prior will be as normal at the rate of 6% and the government will decide on businesses that have made their claims,” Thaneermalai told The Malaysian Reserve.

He also expects consumers to delay purchases of big ticket items until the date of the zero rate GST.

The GST, which was introduced in April 1, 2014, covers 553 types of goods and services.

The former government had resorted to the consumption tax to boost the treasury’s revenue. The tax helped the government’s finances as income from the oil and gas sector thinned due to the commodity price rout in 2014.

The government collected RM44 billion from the GST last year, higher than the RM41.2 billion recorded in 2016 and RM27 billion in 2015.

Former Bank Negara Malaysia governor and Council of Eminent Persons member Tan Sri Dr Zeti Akhtar Aziz had allayed fear, especially foreign investors’, that the abolishment of the GST would severely impact the government’s revenue.

“The fiscal position can be improved not only from the revenue side, but also the expenditure side. There will be re-prioritising of projects, efforts to increase the government’s efficiency and reduce was-tage in the public sector,” she was reported as saying on Tuesday after meeting some 180 fund managers.

The highly regarded former central banker also believed that the country’s sovereign rating could improve with the improved fiscal position.

A restaurant owner in Kuala Lumpur’s Setiawangsa, Ashraf Ariff, 40, said the move to change to zero rate is more convenient to business operators instead of a total abolishment.

“It is easier to announce zero percent than downright abolishment because it will involve recalibration and we may incur more cost to do the changes. Now, I only have to change the 6% to 0%,” he said.