SST to stay, govt to adopt ‘good’ GST features

The Malaysian government has decided to keep the sales and service tax (SST) while incorporating beneficial aspects of the goods and services tax (GST), Deputy Finance Minister Liew Chin Tong announced today. According to Liew, the SST is more comprehensible and has been in operation for over five decades. He explained that the government will integrate useful components of the GST, such as measures to avoid cascading and double taxation.

Liew questioned whether the GST is inherently a superior system, noting that it would require roughly 480,000 tax-collecting agents compared to the SST's 80,000. The main objective is to create a system that does not disrupt the majority, he stated during a speech in the Dewan Rakyat. The GST allows businesses to transfer taxes directly to consumers, which the government aims to balance to protect consumers and businesses from cascading tax effects, Liew added.

Deputy Opposition Leader Hamzah Zainudin inquired if the government intends to retain the SST or implement a new hybrid system. Liew responded to this by emphasizing the need for businesses to have clarity in planning, citing conflicting information regarding whether the government would maintain the SST, opt for a hybrid model, or revert to the GST.

On August 18, Prime Minister Anwar Ibrahim mentioned that the government is willing to examine suggestions to combine aspects of the GST and SST, particularly GST features that could enhance tax efficiency. The GST, a multi-stage consumption tax, was introduced in April 2015 at a rate of 6%, later becoming zero-rated in June 2018.

It was subsequently replaced by the SST in September 2018, in alignment with the Pakatan Harapan administration's campaign promises. The government has repeatedly dismissed calls to reinstate the GST, asserting that this option will only be considered once Malaysia's median wage surpasses RM4,000.