KUALA LUMPUR: The government's proposed hybrid taxation system that combines the current Sales and Service Tax (SST) with the Goods and Services Tax (GST) is welcomed but must balance business growth and ease of compliance, says a trade body.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said it has been strongly supporting the reintroduction of the multi-stage GST due to its more efficient and transparent nature compared with the single-stage SST.
“The GST’s input tax credit mechanism eliminates cascading compounding costs and captures broader revenue compliance.
“However, the government maintains that household income thresholds are still too low, choosing instead to refine the current SST and explore a targeted hybrid SST-GST framework,” it said in a statement on Thursday (Aug 20).
ACCCIM said the GST and SST are two completely distinct indirect tax frameworks with fundamental differences in how they are structured, legislated and applied across the economy.
“Hence, it requires a comprehensive review of the proposed hybrid framework to ensure its smooth implementation.
“These include aligning accounting rules and legal definitions to eliminate ambiguity for small and medium enterprises,” the statement read.
It added that the elimination of the cascading effect is one of the most praised features of GST as input tax credit allows businesses to claim back tax paid on business purchases and raw materials.
It also helps to reduce business costs and boosts the cost competitiveness of domestic industries, ACCCIM said.
While the Finance Ministry conducts a comprehensive review of the proposal, the chamber asked the government to also consider reducing paperwork and documentation requirements, provide automatic input tax claims with random audits conducted later and shorten the turnover time for input tax refunds in order to achieve ease of compliance and cash flow.
“Overall, the proposed hybrid SST-GST framework must balance business growth and ease of tax compliance while sustaining the federal revenue without disproportionately impacting lower-income groups and small businesses,” it said.
On Wednesday, government spokesperson Datuk Seri Fahmi Fadzil said Prime Minister Datuk Seri Anwar Ibrahim has instructed the Finance Ministry to conduct a comprehensive study on the proposed hybrid taxation system that combines the current SST with the GST.
He said Second Finance Minister Datuk Seri Amir Hamzah Azizan had been tasked with leading the study and preparing a report for the Cabinet.
