GST more efficient, but not suitable for now


MALAYSIA will benefit from a gradual transition from the current Sales and Service Tax (SST) to the Goods and Services Tax (GST) as the latter is a more efficient and broad-based taxation tool, experts said.

Deloitte Malaysia indirect tax leader Tan Eng Yew said Malaysia could go back to implementing GST that was abolished in 2018 through the hybrid system where the SST is broadened and developed before being transformed into a new GST.

“A hybrid system means broadening the SST and giving more relief, it translates towards a more broad-based multi-stage tax.

“We are moving towards a broad-based tax that provides relief to business transactions so that at the end of the day, consumers only pay tax once which is at the final consumption,” he told reporters at the second Malaysia Tax Policy Forum in Putrajaya yesterday.

The GST was implemented on April 1, 2015, in Malaysia at a rate of 6%.

Several goods and services that were mainly for domestic use and essential services were categorised as zero-rated and exempt supplies.

The tax was reduced to 0% on June 1, 2018, after the previous Pakatan Harapan government took over and replaced it with the SST on Sept 1, 2018.

However, Tan said now is not the right time to announce the implementation of GST as the economy is still slowly recovering from the plunge caused by the Covid-19 pandemic.

“After the announcement is made, I think businesses may only need between six and nine months to prepare themselves to get back to GST as it was only abolished two years ago and people may still have the knowledge on the system.

“Sufficient time must be given in terms of preparation and also enough training must be provided for people to understand what the government is trying to do. The need for the rakyat should also be preserved,” said Tan.

The rate for the new GST should not be more than the previous one and it must be in line with the economic needs, said Tan.

“But the most important point is that GST is more transparent than SST. The transparency puts accountability to the government as well.”

The Malaysian Institute of Certified Public Accountants Dr Veerinderjeet Singh said relevant parties can analyse the weaknesses present in SST before slowly moving towards transitioning it to GST and implement it across all channels.

He said the problems that lie within SST can be solved over time and it is still able to generate a good amount of revenue.

“What will bring you revenue is a broad-based tax. As a policy measure, GST is a good option which will ultimately lead to better compliance, and as Customs improves its capability and use technology efficiently, we will see a good collection of revenue that we should be getting.

“But ultimately as a nation that is heading towards a developed status, the GST will have the checks and balances and will lead to better compliance among the various players in the market.”