Malaysia GST summary in 9 points

What is GST?

GST is the acronym of Goods and Services Tax and is virtually a tax charged on consumption

or rather spending. This tax is collected throughout the supply process and not a single stage

is left behind. It is therefore charged throughout the chain from the manufacturer, distributor,

wholesaler, supplier and retailers.


2. How will I be affected?

Anybody in the country who plays any role in the economy by being a consumer will

definitely be affected. This means that everyone will be affected by this because everyone

is truly a consumer. You will not need to fill any forms since GST will be collected by



3. Is the GST a new tax?

This is a replacement of the sales tax and service tax that has always been there in Malaysia

and is therefore not a new tax in the land. Being a unit of the Royal Malaysian Customs, GST

maintains the roles of the previous taxation method only that it’s more efficient. It is also

geared towards cushioning the lives of the citizens. While the sales tax has since 1970 been at

the 10% level, GST charges only 6%.


4. Why do we need the GST?

It is true that the government is getting more revenue by using GST than by the sale tax

method previously used. On the other hand, the government has also made life easier by

introducing this tax method and leaving the sales tax method. The reason why more revenue

is being collected even though the percentage levied has been reduced is because there is a

wider base area of taxation in GST system.


5. Will the GST cause inflation?

The overall impact of GST is anticipated to be zero. This is because through the introduction

of GST, some goods will increase in price while others will reduce. These leads to a neutral

impact hence no inflation.


6. Will the GST be levied on basic necessities?

The Malaysian government will take the same procedure that has been taken bvy all the

countries that have introduced GST. These countries have either zero rated or even not

charged GST on some basic commodities. However, it is anticipated that the malaysian

businessmen may get an excuse of GST to increase prices of even the Zero rated goods.


7. Will there be a corresponding fall in income tax to compensate?

So far, it is not clear whether there will be a fall because the minister for finance came out

to say that GST will be introduced with other policies as a package to cushion economic

situation. However, he didn’t say how.


8. Will the GST increase the cost of doing business?

Economists say that there will be not a single impact on the business to business transactions

since all the burdens and relief of businesses are always channelled to the consumer. It is

therefore most likely that the end user is the one who will feel the pinch by the introduction

of GST.


9. Will the GST take more from the poor than the rich?

According to economists, GST will, impact those in the lower socioeconomic class than

the rich. It si also a double taxation strategy with will mean that people will be taxed more.

However, small businesses have been cushioned by the introduction of the RM500, 000

revenue limit for you to be compelled by law to comply. Other commodities have also been

zero rated.