KUALA LUMPUR: The Pakatan Harapan government has delivered one of its key election promises by effectively abolishing the Goods and Services Tax (GST).
In a statement issued yesterday, the Finance Ministry said goods and services subject to GST will be zero-rated from June 1.
The ministry said the reduction of GST rate from the current 6% to 0% will be implemented nationwide until a further announcement is made.
Goods and services listed in the Goods and Services Tax (Exempt Supply) Order 2014 remain exempted from GST, it added.
“All registered traders must follow the decision of the zero rate.
“At the same time, registered businesses are still subject to all current regulations such as issuing tax invoices, submitting tax statements and claiming input tax credit.
“Traders should also ensure the prices of the goods and services set comply with the Price Control and Anti-Profiteering Act 2011 all the time,” the statement said.
GST was implemented in April 2015.
Pakatan had promised it would abolish GST in the first 100 days after taking over Putrajaya.
Prime Minister Tun Dr Mahathir Mohamad, who is also Pakatan chairman, said the Federal Government will need to bring back sales tax to replace GST.
He admitted that removing GST without replacing it with an alternative source of revenue would be “very bad” for the Government.
Tax Advisory and Management Services Sdn Bhd CEO Yong Poh Chye said zero-rated GST is a transitional situation which will lead to the abolition of GST as part of Pakatan’s election manifesto.
“What this means is that all consumers will not be charged GST effective June 1 and suppliers will also not have to bear this consumption tax. In short, the price of goods must come down by 6% or more after it is zero-rated.
“It is transitional as it will need the law to pave the way for the introduction of sales and services tax (SST),” he added.
Ernst & Young Tax Consultants Sdn Bhd partner and Malaysia tax leader Amarjeet Singh said the zero-rating move allows the new government to fulfil its promise to remove GST immediately without too much disruption to businesses.
It also gives time to the Government to plan and reintroduce SST.
In the meantime, Amarjeet said, there should be additional tax revenue from the slightly higher oil price.
Another tax consultant said the issue is whether or not the prices of goods would come down.
“The general complaint is that prices have gone up since GST. What we will see immediately is the reduction of the GST portion.
“Whether prices will be reduced further remains to be seen.
“The Government needs to have some mechanism to ensure that prices actually do come down. There must be some monitoring to ensure its success,” she said.