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GST fairer, more transparent than SST, says FMM

FMM In The News: THE STAR, Kuala Lumpur, Thursday, June 2, 2022 -  The reintroduction of the goods and services tax (GST) at a rate that would not burden the people but still help lower the government debt ratio is welcomed, says the Federation of Malaysian Manufacturers (FMM).

President Tan Sri Soh Thian Lai said the GST was a fairer and more transparent tax regime compared to the sales and service tax (SST).

"We (FMM) are of the opinion that the GST is a more transparent and effective tax regime compared to the SST.

"Based on a survey carried out by FMM on the reintroduction of GST in May 2020, a total of 499 companies who responded to the survey strongly supported GST replacing the current SST 2.0.

"GST provides a fairer tax structure and eliminates cascading and compounding taxes commonly found in the SST regime.

"In addition, prices of Malaysian exports will become competitive on the global stage as no GST is imposed on exported goods and services.

"The GST incurred on inputs can be recovered along the supply chain," he said in a statement on Thursday (June 2).

Soh said 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.

However, he urged the government to consult all stakeholders for a thorough review to ensure the success of introducing an effective tax regime.

"While switching to the previous automated model under the GST Tax Payers Access Point (TAP) system will not be difficult as GST compliance systems are already in place, companies have asked for a six-month transition period to change from the current SST to GST 2.0 based on our May 2020 survey.

"Specifically, manufacturers have proposed improvements to GST 2.0 to be more consumer and business friendly.

"We suggest that the implementation of the GST be done at a 4% rate while corporate tax be reduced to 20%.

"The government should zero-rate all essential goods and services, set the GST registration threshold at RM500,000, and minimise delays in refunds, especially for exporters and businesses with zero-rated supplies.

"We further suggest the government include the provision of interest on late payments and refunds in the GST legislation to ensure strict compliance with the client charter and the integrity of the system.

"We also urge the government to create more efficient schemes to replace Approved Trader Scheme (ATS) and Approved Toll Manufacturing Scheme (ATMS) as they are complicated and difficult to implement," he said.

Soh then suggested the government ensure a proper mechanism to monitor price control and anti-profiteering in the market when the tax system is reintroduced.

"We acknowledge that the possible transition to the GST tax regime can be challenging and urged that all stakeholders be consulted for a thorough review process to ensure the success of introducing an effective tax regime," he said.

The GST was implemented on April 1, 2015 at a standard rate of 6% and later abolished in 2018.

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