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FMM welcomes reintroduction of GST, but calls for improvement over previous system

FMM In The News: THE EDGE MARKETS, KUALA LUMPUR, Monday, December 14, 2020 - The Federation of Malaysian Manufacturers (FMM) welcomes the government’s proposal for a reintroduction of the goods and services tax (GST) and said it has been a strong supporter of the tax regime, as compared to the sales and services tax (SST).

In a statement today, it said GST is a more transparent and effective tax regime versus the SST, with over 160 countries around the world having implemented the former due to its fair tax structure.

“More importantly, prices of Malaysian exports will become more competitive on the global stage, as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain,” said FMM president Tan Sri Soh Thian Lai.

The federation was responding to news reports last week that the government was studying the feasibility of reimplementing the GST or other consumption tax models. Deputy Finance Minister II Mohd Shahar Abdullah was reported as saying in Dewan Rakyat that the government would consider various aspects including weaknesses in the SST which is in force now, and those of the GST that was implemented in 2015.

According to a survey by the federation in May involving 499 companies, FMM said there was strong support for GST to be reintroduced and improved, to be more consumer- and business-friendly.

The suggestions include a reduction in the GST rate to 3% from 4%, the zero-rating of all essential goods and services, maintaining of the GST registration threshold at RM500,000, as well as the allowance for a six-month transition period from the current SST to GST.

Besides that, businesses asked the government to minimise delays in refunds, especially for exporters and businesses with zero-rated supplies, as the long refund period of between six- to eight months rendered the GST “into an accumulating tax burden”.

Respondents of the survey also supported the inclusion of an interest on late payments and refunds in the GST legislation, to ensure strict compliance to the client charter and integrity of the system.

Moreover, the federation called for more efficient schemes to replace the Approved Trader Scheme (ATS) and Approved Toll Manufacturing Scheme (ATMS), as well as a proper mechanism in place to monitor price control and anti-profiteering in the market, when the GST is reintroduced.

“Change and transition can be a challenge and therefore, FMM calls for the government to consult all stakeholders throughout this review process, which is essential to the success of introducing an effective tax regime,” said Soh.

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