KUALA LUMPUR: Reintroducing the Goods and Services Tax (GST) remains off the table as it would force significantly more businesses to shoulder tax reporting and compliance costs compared with the existing Sales and Service Tax (SST) system, says Finance Minister II Datuk Seri Amir Hamzah Azizan.
He said nearly 700,000 businesses, or 90% of the total cited, were registered under GST in 2018, compared with only 130,000 businesses, or 1%, under SST in 2026.
"This means that under the GST system, significantly more companies would have to manage tax reporting and bear compliance costs compared with the existing SST system," he said during the winding-up of the Budget 2027 debate in the Dewan Rakyat on Thursday (Oct 29).
Amir Hamzah said the government recognised GST's advantages in terms of collection efficiency, transparency and its input tax credit mechanism, but stressed that the choice of taxation system must take into account the people's financial circumstances.
He said GST tended to be regressive, particularly for lower-income households that spent a larger proportion of their earnings on goods and services.
"Although the tax rate is the same, the burden relative to income is heavier on the people, particularly those in the B40 and M40 groups.
"Therefore, any additional revenue must be assessed alongside the burden borne by the people," he said.
Amir Hamzah said SST allowed the government to adopt a more targeted and progressive approach by determining which goods and services should be taxed while exempting essential items.
"As emphasised by the Prime Minister, as long as people's incomes have not reached a reasonable level and the cost of living remains burdensome, reintroducing GST is not an option for the government," he said.
Amir Hamzah said improvements to SST had also demonstrated its ability to generate substantial government revenue without reverting to GST.
According to the Fiscal Outlook 2027 report, he said SST collections are expected to rise from RM55.9bil in 2025 to an estimated RM67bil this year, before reaching RM73.3bil in 2027.
This represents an increase of RM17.4bil over two years, he added.
"Current SST collections have reached 3% of gross domestic product (GDP), the same level recorded under GST in 2017.
"This means that the proposal to replace SST with GST would not necessarily generate additional revenue.
"It would merely shift the tax burden from businesses, including exporters, entirely onto the people," he said.
Amir Hamzah said the government would continue refining SST to reduce overlapping taxes and compliance costs for businesses.
Under Budget 2027, he said manufacturers would be allowed to reclaim sales tax on machinery, spare parts and equipment purchased from local traders and distributors.
He said the facility would also cover raw materials used in producing pharmaceutical products, animal feed, fertilisers and pesticides.
