The government had never planned to abolish the Goods and Services Tax (GST), which was implemented on April 1, 2015 in a bid to restructure the nation's consumption tax system to make it more transparent and efficient, said Johari Abdul Ghani.
"The GST that came into force has taken into account the people's current socioeconomic situation so as to minimise its impact on the people, especially those in the lower-income groups.
"A range of goods are zero-rated while basic goods and services are exempted from the GST," the Second Finance Minister said in reply to a question from Abdul Hadi Awang (PAS-Marang) at the Dewan Rakyat here today.
Abdul Hadi had wanted to know how far the government has progressed to realise its intention of abolishing the GST and replacing it with a more just and equitable mechanism that is also less burdensome.
Johari said the government has also provided various aid packages including the 1Malaysia People's Aid (BR1M) scheme to minimise the impact of the GST on the people.
"In addition, the government has also reduced the individual tax rate by 1 to 3 percent," he said.
For the period from January to Oct 10 this year, Johari said, the government collected RM29.34 billion in GST, up from RM27.93 billion for the nine months after its implementation in 2015.
"Although the GST has been set at 6.0 per cent, if we look at the number of goods that are zero-rated and exempted, the GST rate is effectively only 3.6 percent," he said.
Meanwhile, in response to a supplementary question from Abdul Hadi, Johari attributed the increase in prices of goods that are zero-rated or exempted from the GST to businesses wishing to make up for their lowered profits since the GST came into force.
"When we implemented the SST (sales and services tax), there was much leakage, with many traders not paying the SST due to the inefficiency of the system.
"When we switched to the GST, there definitely would be some price increase especially for basic goods, as these traders previously did not pay the SST or paid only half," he said.
Johari said the implementation of the GST had prevented traders from not paying the consumption tax as under the GST system the traders are cross-referenced.
"This system has put their margins under pressure as they are not making the same profits as when they were not paying the SST," he explained.
The price increase could also be due to traders not really sure about which goods are subject to the GST, he said.
"However, we see that the traders' level of understanding of the GST is improving, as evidenced by the lowering of the inflation rate to around 2 percent now from 3.43 percent in the early days of the GST implementation," he added.