GST is proposed to replace the current consumption tax i.e. the sales tax and service tax (SST).
The introduction of GST is part of the Government's tax reform
programmed to enhance the efficiency and effectiveness of the existing taxation system.
GST is proven to be a better tax system as it is more effective, efficient, transparent and business
friendly and could spur economic growth as well as increase competitiveness in the global market.
GST is capable of generating a more stable source of revenue to the nation because it is less susceptible
to economic fluctuations.
It is important to replace the existing SST in order to eliminate its inherent weaknesses such as
cascading and compounding effects, transfer pricing and value shifting, no complete relief on goods
exported, discourage vertical integration, administrative bureaucratic red tape, classification issues
Various benefits that GST can offer to Malaysian consumers and businesses are:
Improved Standard of Living
The revenue from GST could be used for development purposes for social infrastructure
like health facilities and institutions, educational infrastructures and public facilities
to further improve the standard of living.
Lower Cost of Doing Business
Under the current system, some businesses pay multiple taxes and higher levels of tax-on-tax
(cascading tax). With GST, businesses can benefit from recovering input tax, thus reducing
cost of doing business.
GST is a better and more efficient method of revenue collection for the government.
More funds can be channeled into nation-building projects for progress towards achieving
a high income nation.
Fairness and Equality
With the GST, taxes are levied fairly among all the businesses involved, whether they
are in the manufacturing, wholesaling, retailing or service sectors.
Enhanced Delivery System
GST will be administrated in a fully computerized environment, therefore speeding up the
delivery, especially for refund claims. This makes it faster, more efficient and reliable.
Increase Global Competitiveness
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 supplies chain. This will strengthen our export industry, helping the country progress even
The current SST has many inherent weaknesses making administration difficult. GST system has
in-built mechanism to make the tax administration self-policing and therefore will enhance
Reduces Red Tape
Under the present SST, businesses must apply for approval to get tax-free materials and
also for special exemption for capital goods. Under GST, this system is abolished as businesses
can offset the GST on inputs in their returns.
Fair Pricing to Consumers
GST eliminates double taxation under SST. Consumers will pay fairer prices for most goods
and services compared to SST.
Unlike the present sales tax, consumers would benefit under GST as they will know exactly
whether the goods they consume are subject to tax and the amount they pay for.