GST goes 'zero per cent' from June 1

Galtero Lara
May 16, 2018

Malaysia's new government on Wednesday said it would reduce a goods and services tax to zero from June 1, effectively abolishing it, a move that is likely to spur spending in the Southeast Asian nation but put pressure on its fiscal position.

The ministry said the GST will no longer be imposed at a rate of 6 per cent from then on, adding that this will be subject to further notice.

"The directive has been issued so that we ( the government) do not to collect anymore GST". This excludes goods and services that are now GST exempted.

"As such, all registered traders must follow the decision of the zero rate now".

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The Royal Malaysian Customs Department has also shared the same post from the Ministry of Finance.

So what does this mean to the rest of us? An industry source told us that buyers can not expect to simply remove six percent from current selling prices, as carmakers have paid GST all along the production and distribution process, and the tax isn't just charged to the customer in one lump sum. The current Pakatan Harapan administration had promised to replace GST with SST so this could be a first step to that direction.

Former Bank Negara governor Tan Sri Zeti Akhtar Aziz, who sits on the newly-formed Council of Eminent Persons advising the PH government on the economy and finance, had said the country would still have sufficient revenue even after the GST is abolished. With this new zero-rated GST, this could mean slightly lower bill cost and price reduction for smartphone, tablets and pretty much all goods and services that are now imposed with the 6% GST.

Some analysts fear that the decision would worsen Malaysia's fiscal position, including blowing up the budget deficit, now at 3.1% of GDP.

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