The government can consider the implementation of the goods and services tax (GST) once the businesses have improved in the next 12 to 18 months and the economy is back on its feet, a tax expert told Business Today.
President of the Chartered Tax Institute of Malaysia, (CTIM) Ms Farah Rosley says that the GST was a good tax structure that was introduced in 2015 but its execution was poor.
“The government can re-introduce the tax at the right time by ensuring that weakness in the administration of the tax is addressed. Some of the weaknesses of the system were that refunds came later and businessmen hiked up the prices that lead to the consumers being burdened, “ she says.
She adds that businesses must be given sufficient time to prepare themselves for the implementation of the GST and sufficient communication about the GST must be undertaken to ensure the effectiveness of the proposed system.
Farah says the GST that was introduced in 2016 was able to rake in about RM44 billion as compared to the SST which only brought in over RM20 billion and would have been able to finance the shortfall in revenues that the government was experiencing due to the pandemic.
GST is a multi-stage consumption tax on goods and services whereby each point of supply in a production chain is potentially taxable up to the retail stage of distribution. At the same time suppliers are entitled to refunds of GST incurred on business inputs.
The basic fundamental of GST Malaysia is its self-policing features which allow the businesses to claim their Input tax credit by way of automatic deduction in their accounting system
Former Prime Minister Datuk Seri Najib Razak among others urged the government to reinstate the goods and service tax (GST) as the tax would enable Malaysia to reduce income inequality as soon as the country recovers from the Covid-19 pandemic
Analysts have also estimated that GST could also target the economy which had an estimated turnover of RM300 billion a year, and those had previously escaped paying taxes. It is also believed GST has caused the shadow economy to shrink from 25% to 10% of the normal economy.
Farah also says that the government could consider lowering the GST rates when it is to be re-introduced again and ensure that the Zero-rated is extended or enhanced. For example, Raw Chicken which is deemed an essential good is zero-rated but marinated chicken is 6%. We could also perhaps get marinated chicken to be tax-exempt and many goods of such likes can be exempted which will encourage consumption and that would be good for the economy, ‘ she told Business Today.
When Malaysia introduced GST in Malaysia, it joined 146 countries around the world that had GST and 7 out of the 10 ASEAN countries.