THE sales and services tax (SST) will cover only 38% of the consumer price index (CPI) basket of goods compared with the 60% from the goods and services tax (GST).

Finance Minister Lim Guan Eng said the implementation of the improved SST would “return” RM23 billion in taxes collected to the people, easing their financial burden, especially those affected by high living costs.

“At the same time, the government hopes the addition of the RM23 billion returned to the people will spur private consumption as well as reassure investor confidence, which in turn will stimulate economic growth,” he said during the ministers’ question-and-answer time in the Dewan Rakyat today.

The finance minister was responding to Wee Ka Siong (BN-Ayer Hitam), who wanted to know whether the implementation of the SST would result in price increases and the steps taken to ensure the tax would not burden the people.

Lim explained that the SST would be a “single-tax” that would be imposed on manufacturers and not consumers, whereas the GST, as a “multi-stage tax”, resulted in every stage of the supply chain being taxed.

“Technically, at each level of sales, suppliers can apply for a refund on GST paid as an input tax from the government. However, this process became a big problem to the cash flow of many companies as the previous government was tardy in processing GST refunds.

“This resulted in an increase in the cost of business, which was borne by consumers in the form of higher prices for goods and services,” he said.

Lim said later at the Parliament lobby that the inefficiency of the GST refund process had resulted in companies considering the GST as an additional cost to their operations.

“If it was 100% efficient, with fast payment, it would not have been a problem,” he said.

Lim, however, admitted that the GST was a more efficient taxation system, and the effect of the price increase due to the GST should not differ much from that of the SST, but weaknesses in the GST system resulted in the people suffering.

“The GST is an efficient system for the government, but is a burden to the people.

“The impact from the SST will be half of the GST, which will be in line with the government’s efforts to reduce the people’s burden,” he said.

Lim also said enforcement by the Customs Department and other agencies needed to be improved to prevent tax evasion and profiteering.

“We aim to have an improved, transparent, and efficient SST. In the long run, we hope to see lower costs of living and improved economic growth.

“Despite the removal of the GST, the government is confident this year’s fiscal deficit target will be met. For next year’s budget, I will table it to Parliament on November 2.” – Bernama, July 19, 2018.