THE Federation of Malaysian Manufacturers (FMM) has urged the government to reintroduce the Goods and Services Tax (GST) in the upcoming Budget 2023 to help reduce the country’s fiscal deficit faster and lower the government’s debt ratio substantially.

FMM president Soh Thian Lai proposed the reintroduction of the GST or dubbed GST 2.0 in place of the current Sales and Service Tax (SST) in 2024. 

“As the global environment is expected to be challenging in 2023 and as Malaysia’s current fiscal space remains fairly tight, the FMM firmly believes the revival of the GST is a timely lifeline for the country’s debt dilemma as well as to shore up adequate fiscal buffers in order to weather the next economic downturn,” he said in a statement today.

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

“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.

Referring to the FMM-MIER Business Conditions Survey in the first half 2022 conducted in August 2022, he said, close to three quarters (74%) of the survey respondents strongly supported for the GST to replace the current SST as GST provides a fairer tax structure and it eliminates cascading and compounding of taxes commonly found in the SST regime

Soh suggested the government implement a GST rate of 4%, and 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.

The GST, levied at a blanket 6%, was introduced in April 2015 by the Barisan Nasional government to replace the SST. When the then-Pakatan Harapan government took over in 2018, it replaced the GST with the SST. — TMR / graphic TMR File

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