THE reintroduction of the goods and services tax (GST) to replace the sales and services tax (SST) must be done in a targeted manner so as not to burden the people who are facing rising inflation.

According to former director-general of customs Subromaniam Tholasy, the GST imposed at 6% previously should be extended to goods at 5% and services at 7%.

“The government needs to look at the zero-tax items where this time, it should only be limited to basic items,” he said during the Malaysia Petang Ini programme on Bernama TV today.

Subromaniam said if the tax rate is set too low up to 4%, it will only contribute to neutral income, while higher rates could increase the country’s income and finances, and boost the stock market.

“It will directly impact the strength of the ringgit against the US dollar,” he said.

He also said the reintroduction of GST should take into account the timing, the strength of the ringgit and public policies provided by certain ministries, besides ensuring that inflation can be controlled. 

“There is no denying that the implementation of GST in 2015 had several weaknesses such as subsidy reduction, rationalisation of electricity tariff rates and the depreciation of the ringgit, which caused the Consumer Price Index (CPI) to rise,” he said.

“The current CPI is rising, but it does not translate into more revenue for the government because the impact of SST only reaches the import and manufacturing level for goods, as opposed to GST, which impacts up to the retail level.”

Apart from that, Subromaniam said, the government should not set the threshold value too low as before, at RM500,000, so that small businesses are not included in the tax regime.

“Maybe we can look at a threshold value that is more suitable, at between RM1 million and RM2 million, so as not to burden businesses like a regular grocery store,” he said.

Subromaniam said GST is an efficient, transparent, fair and business-friendly taxation system that can boost the country’s economy and provide competitiveness for its exports.

“GST will definitely stabilise the prices of goods in the long run,” he added. – Bernama, June 2, 2022.