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Bring back GST in 2024, says FMM

FMM In The News: FREE MALAYSIA TODAY, PETALING JAYA, Thursday, January 5, 2023 -  The Federation of Malaysian Manufacturers (FMM) has urged Putrajaya to reintroduce the goods and services tax (GST) by 2024, in place of the current sales and service tax (SST).

FMM president Soh Thian Lai urged the government to include the GST in the upcoming revised 2023 budget for implementation next year.

In a statement, he said GST would help the nation shore up sufficient fiscal buffers in view of a challenging economic climate, while helping the country with its high debt.

Soh said the tax should be introduced at a rate that would not burden people while still helping Putrajaya widen its revenue base.

He said this will enable a faster reduction in fiscal deficit and lower the government’s debt ratio substantially.

“As this broad tax base system would increase indirect taxes, it will give flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination.

“In this regard, GST 2.0’s implementation should not be considered in isolation but as a part of a holistic assessment of Malaysia’s tax systems, which will require the government to consult all stakeholders,” he said.

Soh said GST was a fairer tax structure that got rid of compounding and cascading taxes, which would be found with the SST.

He said a joint survey with the Malaysian Institute of Economic Research (MIER) in August last year found that 74% of respondents backed having GST over SST.

He suggested the government implement a GST rate of 4%, reduce the corporate tax rate to 20% gradually, while ensuring essential goods and services were zero-rated for GST.

Soh also called for the GST registration threshold to be kept at RM500,000 and a provision of interest on late payments and refunds in the tax scheme’s legislation.

Last month, deputy finance minister Ahmad Maslan said Putrajaya was studying the best ways to reduce the budget deficit, estimated at 5.8% of gross domestic product (GDP) for 2022.

However, he said the government will not impose new taxes and that the reintroduction of GST had not been discussed by Putrajaya.

GST, at 6%, was first introduced on April 1, 2015 by the Barisan Nasional government.

It was suspended on June 1, 2018 and finally abolished and replaced with the SST on Sept 1, 2018 by the then Pakatan Harapan government.

The current rate for sales tax is 5% to 10% while service tax is 6%.

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