The Federation of Malaysian Manufacturers in a statement said it welcomes Prime Minister Dato Seri Ismail Sabri’s call for the reintroduction of GST.
GST which was introduced during former Prime Minister Datuk Seri Najib Razak’s tenure was later removed when Pakatan Harapan came into power as one of its election mandate. However, of late the suggestion of GST over Sales and Service Tax has grown stronger as the former system is said to be a better option for the country. On that note, FMM is of the opinion that the GST is a more transparent and effective tax regime compared to the SST.
The federation carried out a survey on the reintroducing GST in May 2020, where a total of 499 companies responded to the survey strongly supporting for the GST to replace the current SST 2.0. The sentiment is that GST provides a fairer tax structure and it eliminates cascading and compounding taxes commonly found in the SST regime. In addition, 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. Moreover, because 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.
FMM added with Government’s focus is the revival of the economy and manufacturers will now need to prioritise their time and energy on rebuilding their business, the reintroduction of the GST should not be considered in isolation but as a part of the holistic assessment of Malaysia’s tax systems and the country’s fiscal position. While the introduction of a broad-based consumption tax would strengthen the country’s fiscal position, GST 2.0 must be easy to manage and also not increase the cost of doing business.
As the change and transition to GST 2.0 can be challenging, FMM is calling for the Government to consult all stakeholders for a thorough review process to ensure the success of introducing an effective tax regime. While switching back 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 6-month transition period to change from the current SST to GST 2.0 based on the May 2020 survey.
Among the recommendation by FMM if GST is reintroduced.
- Reduce GST rate to 4% to boost conducive business conditions which would lead to higher investments and employment opportunities as well as higher disposable income for the rakyat.
- Gradually bring down corporate tax rate to 20%.
- Zero-rate all essential goods and services.
- Maintain GST registration threshold at RM500,000.
- Minimise delay in refunds especially for exporters and businesses with zero-rated supplies as the long refund period between six to eight months has rendered the GST into an accumulating tax burden.
- 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.
- Create more efficient schemes to replace Approved Trader Scheme (ATS) and Approved Toll Manufacturing Scheme (ATMS) as they are complicated and difficult to implement.
- Ensure proper mechanism is in place to monitor price control and anti-profiteering in the market when the tax system is reintroduced.
