FMM supports reintroduction of GST

It will make Malaysian exports more competitive and strengthen economic recovery and growth


THE Federation of Malaysian Manufacturers (FMM) welcomes the possible reintroduction of the Goods and Services Tax (GST).

It said the GST would make Malaysian exports more competitive and also strengthen economic recovery and growth.

President Tan Sri Soh Thian Lai (picture) said GST is a better tax system and is more transparent compared to the Sales and Services Tax (SST).

“Given the weak domestic and external environment brought about by the Covid-19 pandemic, we believe that priority should be given to strengthen the economy and restore more favourable business conditions.

“In this regard, FMM welcomes the recent announcement by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz on the possibility of reinstating the GST by reviewing the weaknesses of the existing SST system and improving upon the former GST system implemented in 2015,” he said in a statement yesterday.

Soh noted that Malaysia’s debt is expected to increase further to 66% of GDP by the end-2022, up from 61% in 2021 and 60.7% in 2020.

He said the situation is a concern because the debt servicing burden is significant at 17.2% of total projected revenues for the year with no stable inflow but high outflows of government expenditure.

This is as a result of higher allocation for Budget 2022 stimulus and recovery initiatives to support the country’s recovery from Covid-19.

“FMM has been a strong supporter of the GST regime as we believe that the GST is a more transparent and effective tax regime compared to the SST.

“Over 160 countries have implemented the GST regime due to its fair tax structure. More importantly, prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain,” he added.

According to Soh, a survey carried out by FMM on the reintroduction of GST in May 2020 showed that 499 companies strongly supported the GST to replace the SST.

Manufacturers have proposed several improvements to the new GST to be more consumer and business-friendly.

Among the proposals include reducing the rate to 3% from the previous 4% to boost business conditions which would lead to higher investments and employment opportunities as well as higher disposable income for the people.

They also highlighted the need to zero-rate all essential goods and services as well as maintain the GST registration threshold at RM500,000.

“While switching back to the previous automated model under the GST Taxpayers Access Point system will not be difficult as GST compliance systems are already in place, companies have asked for a six-month transition period to change from the current SST to GST 2.0,” he added.

They also proposed for the government to minimise delay in refunds especially for exporters and businesses with zero-rated supplies as the long refund period between six and eight months has rendered the GST into an accumulating tax burden.

Other proposals include the inclusion of the provision of interest on late payments and refunds in the GST legislation to ensure strict compliance to the client charter and integrity of the system.

They are also asking for the government to create more efficient schemes to replace approved trade schemes and approved toll manufacturing schemes due to their complexities in implementation.

Previously, Tengku Zafrul hinted at the possibility of a GST reinstatement to overcome the issue of tax leakage.