Finance minister II: GST not an option amid high cost of living, govt sticking with SST

KUALA LUMPUR, Oct 29 — The Malaysian federal government plans to continue implementing the Sales and Service Tax (SST) instead of introducing the Goods and Services Tax (GST), due to the high cost of living affecting the country's citizens. Finance Minister II Datuk Seri Amir Hamzah Azizan stated that the government intends to refine the SST to lessen the cascading taxes impact and streamline compliance procedures.

He emphasized that the SST allows for a more equitable and targeted taxation approach, enabling the government to choose which goods and services to tax while exempting essential items. Amir Hamzah argued that the GST could be regressive as lower-income groups spend a larger share of their income on goods and services, thus placing a heavier tax burden on them.

Despite this, the Fiscal Outlook 2027 projects SST collections to grow to RM67 billion in 2026 from RM55.9 billion in 2025, reaching an estimated RM73.3 billion in 2027, a rise of RM17.4 billion over two years. Meanwhile, the current SST collections constitute three percent of the country's gross domestic product (GDP), identical to the GST's level in 2017.

Amir Hamzah highlighted that replacing the SST with the GST would not necessarily result in additional revenue; instead, it would shift the tax burden from businesses and exporters to the general public. Although the government acknowledges the advantages of GST in terms of collection efficiency, transparency, and the input tax credit mechanism, the choice of tax system must consider the affordability of the average person.

On the compliance aspect, Amir Hamzah pointed out that nearly 700,000 businesses were registered under the GST in 2018, compared to approximately 130,000 under the SST in 2026, implying that more businesses would bear the cost of compliance under the GST system.