THE sales and services tax (SST) can serve the government well in collecting revenue but must be closely monitored for full compliance, a tax expert said.

Axcelasia Taxand Sdn Bhd’s Veerinderjeet Singh said while the goods and services tax (GST) had been a more efficient tax collection system, SST, which Pakatan Harapan introduced after taking over the federal government last year, can work with close monitoring.

The GST was more efficient as it is based on an “input-output” mechanism. 

“It works as there are requirements for proper filing, auditing and record keeping all across the chain,” Veerinderjeet said.

Unlike GST, which is a cascading tax, SST is a single step tax system. 

“But it can work well too as long as the government is efficient in monitoring the various companies,” he told a post-budget forum held at Bank Negara Malaysia today.

SST revenue for 2019 is projected to hit RM22 billion, about half of what the GST was able to collect. The government’s economic outlook for 2020, released last Friday when Budget 2020 was tabled, expects RM28.30 billion to be collected from SST.

Veerinderjeet said SST collected less revenue because it covers only half the items taxed under the now defunct GST.

“SST revenue is lower because it only covers 38% of items, while GST covered 70%.

“The GST base was much wider. If SST is widened to 70%, it would collect the same amount of revenue,” said Veerinderjeet.

As the government has already decided to replace GST with SST, there was little point in revisiting the issue, he added.

“The issue is really about how to make SST more efficient and build attributes in the system to move forward.”

Finance Ministry under-secretary (tax division) M.A. Sivanesan agreed that the SST had its weaknesses but said Putrajaya had already decided to use it.

“We can increase the number of items that can be taxed under SST but this will impact the final price. And ultimately we will still have to deal with inflation issues,” said Sivanesan.

Pakatan Harapan repealed the GST and brought back SST to fulfil one of its campaign promises, but has been taunted by the opposition since about lower revenue from the SST. – October 14, 2019.