SST to start in September as govt plugs financial hole

Lim says goods sales will incur 10% tax, while the provision of services will be taxed at 6%


The government expects a revenue of RM4 billion with the reintroduction of the Sales and Services Tax’s (SST) 10% rate for goods and 6% for the provision of services, which would be introduced this September, said Lim Guan Eng.

The finance minister said the SST, which is a replacement to the zero-rated Goods and Services Tax (GST), will come into effect in September after the related bill is tabled and passed during the current Dewan Rakyat sitting.

“We expect this bill to be passed in August during the current parliamentary sitting, which will allow us to bring in a projected revenue of RM4 billion for the last two months of the year.

“Under the proposed bill, goods sales will incur 10% tax, while the provision of services will be taxed at 6%,” he said at the National Tax Conference 2018 in Kuala Lumpur yesterday.

He said the SST re-introduction, rising crude oil prices and extra dividends from government-linked companies would deliver an extra RM15 billion to the government’s revenue this year.

The previous administration had expected revenue from the GST to exceed RM44 billion this year. But Barisan Nasional’s unexpected defeat on May 9 saw the newly installed government removing the unpopular tax system. The move, however, risks putting the country’s finances in a precarious state as the GST had been a strong revenue channel.

Lim did not elaborate what are the items that would be taxed under the SST. Under the GST, most items from car insurance policies to daily needs to utility bills are taxed.

Lim said the federal government expects to lose RM21 billion in revenue per annum following the zero-rating of the GST since June 2018. The previous administration collected RM44 billion from the GST last year and RM41 billion in 2016.

“To fill the gap left by GST, the Ministry of Finance (MoF) has identified RM10 billion worth of expenditure savings.

“We expect a shortfall of around RM21 billion this year. Altogether, per year, you’re looking at RM42 billion. But we will claw back about half the amount from SST.

“So, there’s still a shortfall of RM21 billion. That’s where we need to do a bit of belt tightening by cutting down expenditures and inefficiencies,” Lim said.

He said the government “means business” in achieving savings and is aggressive in reviewing some of the mega projects announced by the previous government.

The reviews, Lim said, include the 37km Light Rail Transit Line 3 (LRT3), which the cost had been reduced by 47% to RM16.63 billion from RM31.65 billion.

The LRT3 project is seen as a critical component to the Klang Valley’s public transport network. The government had scaled down the number of stations and trains to bring the cost down.

“We reduced the cost of LRT3 and some will ask why we reduced the stations, but we have no choice. If we don’t do that, we will not have an LRT3 because this country cannot afford all these mega projects anymore, especially when we are required to pay RM50 billion just for 1Malaysia Development Bhd (1MDB),” Lim said.

He said LRT3 and other projects could have been maintained if not for 1MDB and “many other scandals like 1MDB which have cost us tens and tens of billions of ringgit”.

“LRT3 is also a mini 1MDB- type of scandal because they hid the real cost of the project. This is one of those hidden files where they said the cost was RM10 billion, but it’s actually RM32 billion, and Prasarana Malaysia Bhd has no choice but to admit it,” he said.

Prasarana, a government- owned company which owns and operates RapidKL bus and train services, said last week that it would comply with the MoF’s instruction to rationalise the LRT3’s costs.

Lim said the government will pay another RM1.3 billion on behalf of 1MDB by the end of this year, as part of the RM50 billion worth of 1MDB-related debt obligations.

“As much as we are tempted to impose new taxes to cover up all these expenses, we know the people are suffering, especially the lower income group. We do not want to tax you to death, but we hope that you are able to pay the taxes to help us save our country,” Lim said.

He added that the government is aware of taxpayers’ unease over various actions taken by the Inland Revenue Board (LHDN) to improve tax collection.

“Sometimes, LHDN may have been overzealous in overcoming tax collection challenges. Raids involving gun-toting security personnel have stopped. Now, LHDN is adhering to the rule of law by conducting desk audits instead,” Lim said.