Sunday, March 28, 2010

Goods & Services Tax (GST) Malaysia

March 27, 2010
By Fred Victor

Goods & Services Tax (GST) Malaysia


The proposed introduction of Goods & Services Tax (GST) has been creating concerns perhaps misperception since the announcement of the Malaysian Government recently.

Malaysia’s planned GST at 4% to replace the current sales and services tax of 5% and 10% respectively is reasonable, compared with neighbouring countries which started with higher GST rates. By far, there are about 150 countries, mostly developed countries that have adopted GST.

GST Isn’t an Additional Tax

“The proposed GST is actually not an additional tax but intended to replace the existing tax structure,” Prime Minister Datuk Seri Najib Tun Razak said¹. No doubt, such GST has unfortunately caused lots of concerns among the people of Malaysia.

Accordingly, the implementation of the GST, based on current estimates, would not lead to price increases as it would be offset by the abolishment of the existing sales and services tax (SST).

Businesses related to government services such as food (e.g. rice, sugar, cooking oil, flour etc.) and transport, are exempted from the GST.²

In short, with the proposed GST, consumers would pay 4.0% tax compared to the current service tax of 5.0% and sales tax of 10%.

GST Favourable for Malaysia in Long Term

The fiscal benefits from GST implementation would be felt more in the medium term though immediate benefits is far less visible. This is due to GST is a regressive tax hitting the lower income group the most, no doubt, it could be politically unpopular.

However, the Government is expected to study all aspects before introducing the tax.³

GST would impact not only businesses but also individuals at early stage. But, it would be good for the country in the long-term. This is because:-

*It would trigger major culture changes of an organization. More importantly, the way of how the business operates though the degree of its impact would depend solely on the type and size of the business. Consequently, it would create “Smart Economy”.

*It would immediate impact on individuals’ spending behaviours. Consequently, it would create “Smart Consumer”.

For Malaysian Government, there would be conservative revenue gains of about MYR1.0 billion, with the GST implementation as the introduction of the GST is part of an overall tax reform in Malaysia. In other words, with the GST, the Government would have a better mix of revenue besides current Income Tax and Petroleum Income.

GST Likely in 2012

“No date has been set to start implementing the GST,” PM said⁴, as the GST has created concerns and misconception by claiming that was an additional tax.

Malaysia may eventually implement the goods and services tax (GST) although analysts say it is more likely to happen either in 2011 or 2012⁵, though sources had earlier reported that the implementation of GST has been put off till after the next general election.³

According to Economists and Tax Experts, the timeline for GST to happen may not be in 2010, nevertheless, it’s more likely in 2011 when growth becomes more entrenched.

¹ New Straits Times, March 18, 2010
² New Straits Times, March 4, 2010
³ The Malaysian Insider, March 27, 2010
⁴ New Straits Times, March 19, 2010
⁵ Business Times, November 25, 2009


  1. Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me.


  2. AnonymousJuly 31, 2012


    Probably the best time for full implementation is after the 13th GE Election.

    I see no reason for the delay.

    I see no concrete reason why the old SST Taxes should not be replaced by a better alternative in the form of SST Taxes.

    Jeong Chun Phuoc
    SENIOR LECTURER and Expert Law Consultant External at a major international consultancy firm
    and a pioneer advocate in Competitive Legal Intelligence(CLI)
    He can be reached at

    **The above professional analysis is the writer's personal view and in no way represent the view/position of the research institutes/thinktanks/organisations to which he is currently attached to.

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