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,Prime Minister Datuk Seri Ismail Sabri Yaakob indicated that the government was keen to bring back the goods and services tax (GST) as a means to expand the nation’s revenue base and replenish the federal coffers.He added that the government will aim for a rate that does not burden the rakyat, but at the same time is reasonable enough to achieve the tax’s intended purposes of expanding tax revenue.

IN a recent interview with Nikkei Asia, Prime Minister Datuk Seri Ismail Sabri Yaakob indicated that the government was keen to bring back the goods and services tax (GST) as a means to expand the nation’s revenue base and replenish the federal coffers.

He added that the government will aim for a rate that does not burden the rakyat, but at the same time is reasonable enough to achieve the tax’s intended purposes of expanding tax revenue.

Prior to the reintroduction of GST, the government would ensure that the public is informed and educated on the importance of GST as a transparent tax collection system.

Why is the reintroduction of GST being considered? Some of the reasons that the reintroduction of GST is being considered include:

> GST would enable the government to widen the scope of tax, increase its revenue collections, and reduce reliance on corporate income tax and petroleum income tax, hence easing the pressure on government coffers.

Historically, the GST brought in an average of RM40bil in annual revenue, while the sales and service tax (SST) only brought in an average of RM25bil annually.

> GST is a more efficient tax system than SST, as GST mitigates the tax cascading effect due to the irrecoverability of SST incurred.

Under the GST system, businesses would be able to recover the GST incurred as input tax credits, GST would generally not be a cost to businesses and would be borne by the final consumer.

GST is more business-friendly as it is less ambiguous, where the tax system would also allow for automated tax identification and reporting.

This would reduce the tax administrative burden and potentially reduce tax controversy.

For example, under the existing SST regime, multiple exemptions and facilities have been introduced to provide some form of relief and address additional business costs due to the mechanisms of the SST.

These exemptions and facilities come with various conditions which must be complied with by taxpayers, who would need to defend their positions in the event of any queries or challenges from the Royal Malaysian Customs Department.

Further, given the fact that SST, unlike GST, only applies on prescribed taxable services provided by taxable persons, there is a greater element of judgement and analysis involved, which can lead to a lack of clarity and penalties where an incorrect position is taken.

The burden is not just on taxpayers, as the Royal Malaysian Customs Department also needs to review the SST positions taken by taxpayers and their compliance with relevant conditions.

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