Friday, 1 June 2018

The Sun Sets on GST

GST and the transition to SST

Goods and Services Tax (GST) came into effect in Malaysia on 1 April 2015, replacing the Sales Tax and Services Tax (SST) regime. Touted as an all-encompassing tool that has a wider tax base as well as being transparent and efficient, GST brought in RM44b to the government coffers in 2017. This enabled the narrowing of the fiscal deficit.

The introduction of GST coupled with external factors brought about increased prices of goods and services, even the essential ones. Compliance cost and disproportionate price increases contributed to the negative perception of GST.

During the run-up to the 14th General Elections, Pakatan Harapan promised to abolish GST.

Within a week of being in power, the new Government announced that GST would be zero-rated from 1 June 2018, fulfilling one of its biggest promises. On 17 May 2018, it confirmed that SST will be reintroduced. On 30 May 2018, it was announced that SST will be reintroduced in September. The zero-rating of GST enables preparations for the upcoming SST regime while allowing consumers to enjoy a temporary “tax holiday”.

With GST zero-rated, there is a feel-good factor and savings for the consumers. Business outlook and consumer sentiments are expected to improve, albeit temporarily. However, some are more pragmatic. A reduction in the GST rate may have been be sufficient. Businesses are probably concerned over the last-minute preparations to update their tax software and swap out shop displays.


In the transition from GST to SST, we find ourselves in a similar situation when the country removed SST and implemented GST in 2015. Under the GST regime, business opportunities were created, not just in the tax and accounting industry, but also in the technological and legal fields. As we would have learnt from our experiences, we can do it better and we can do it faster this time round.

In this period of transition, there are attempts to provide guidance based on official information provided by the Ministry of Finance and the Royal Malaysian Customs Department. Numerous articles, FAQs and videos on what to expect has been released. Numerous forums on coping and managing the eventual transition are being organised.

It cannot be denied that GST is a progressive and efficient taxation regime. It is a tax that comes highly recommended by the OECD, and over 160 countries have adopted GST. Even when SST comes into force in September, there is still a need to address the country’s revenue shortfall. It would be interesting to see SST rates and its scope of coverage. Would it be sufficient, when combined with the government’s cost-cutting measures, to make up for revenue shortfall? Or would it be more prudent to allow GST to remain for now and shift the focus to the refinement of tax policies?



Wolters Kluwer are delighted to invite you to a complimentary 2.5 hour forum that addresses the key issues, grey areas and risks that all business operations in Malaysia will face during this period of transition.

So come along and hear from the distinguished panel of leading tax practitioners from Axcelasia Inc, Petronas, Deloitte, Ernst & Young and Maybank, who will explore the challenges and provide thought-leadership on present developments and what are the anticipated impact of these changes on your business in the near future. In addition, there will be an invaluable opportunity to ask questions.

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