Manufacturers back GST 2.0, suggest 4 pct rate

The Federation of Malaysian Manufacturers (FMM) has expressed support for a return of the goods and services tax (GST) which was recently hinted at by Prime Minister Ismail Sabri Yaakob.

In a statement, FMM said it had surveyed 499 companies that "strongly supported" GST over the current sales and services tax (SST).

A GST rate of four percent was recommended by the FMM, arguing that such a rate would be conducive. The first iteration of GST was set at six percent.

"GST provides a fairer tax structure and it eliminates cascading and compounding of taxes commonly found in the SST regime.

"In addition, prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain.

"Moreover, because this broad tax base system would increase indirect taxes, it will give flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination," said the FMM.

Corporate taxes, said the FMM, should be reduced to 20 percent, down from 24 percent, once GST is implemented.

The FMM said although switching back to the GST system should not be difficult because it was previously in place, the government should engage stakeholders first and allow for a six-month transition period.

A key challenge, said FMM, was to minimise delays in the refund process, particularly for exporters and businesses with zero-rated supplies.

"The long refund period between six to eight months (experienced previously) has rendered the GST into an accumulating tax burden," said the FMM.

The FMM also suggested zero-rating all essential goods and services while maintaining the previous GST system's registration threshold at RM500,000.

GST was introduced by the Najib Abdul Razak administration in 2015. It was highly unpopular and scrapped by the Dr Mahathir Mohamad administration in 2018. - Mkini