THE government has no plans to reintroduce the goods and services tax (GST) this or next year because it wants to focus on targeted subsidies first, said Deputy Finance Minister I Ahmad Maslan.

He said the government will implement the taxes as mentioned in Budget 2024 next year.

“Yes, we have to find income. So, the SST tax is increased from 6% to 8%. Otherwise, how do we find income?

“One more thing, because we want to implement targeted subsidies, we will implement it on diesel first and then RON95. Because we are holding related matters (targeted subsidies), we will postpone (implementation of GST),” he said in Dewan Negara today in response to an additional question from Senator Sivaraj Chandran, who wanted to know about the GST implementation plan and suggested that the GST be reintroduced at a rate lower than 6%.

Ahmad said he did not know when GST would be brought back in Malaysia, when 90% of countries in the world had already implemented GST.

“Of course they have the finance ministry, of course they have the central bank, of course they have economic experts and all of them say that GST is better than sales and service tax (SST). Only Malaysia has reversed its thinking,” he said.

Meanwhile, he said the government implemented a 6% GST instead of 3% at that time because if the government only imposed a 3% tax, then there would be no additional tax that the government could obtain.

“Malaysia is the only country that has implemented (GST) and then withdrawn it. These are all political reasons actually, not economic reasons. Before we have GST, we implemented SST, the good thing is that GST is only one tax, SST has two taxes,” he said.

He said that among other benefits of GST is that it can reduce the shadow economy – before GST was implemented, 30% of gross domestic product (GDP) was the shadow economy.

“When we implement GST, those two or three years can reduce by 10%, so it results in profit-making countries and the shadow economy to remain at 20%, although it should be less than that if we continue to implement GST,” he said, adding that GST is not a tax on taxes.

He said that GST also reduces business costs because there is a “tax refund” element, which is the return of “input tax” to companies and manufacturers, in addition to GST not being levied on exports.

“GST is a progressive tax, the meaning of this progressive tax is, the more we spend, the more money we have, the more tax we pay.

“GST has two rates, which are zero-rated and 6%. Because there is a zero-rated element, GST can help the people, for example fresh food, food that people need is not subject to GST but SST now, many things have to be compared to SST. In summary, GST is much better from SST,” he said. – Bernama, November 28, 2023