The recent report that Prime Minister and Finance Minister Dato’ Seri Anwar Ibrahim’s ministry is studying the possibility of incorporating some features of the Goods and Services Tax (GST) into Malaysia’s existing Sales and Service Tax (SST) has reopened an old and highly sensitive debate.
GST was abolished in August 2018. It had become one of the major political issues used by Pakatan Harapan (PH), together with the 1MDB controversy, in the campaign that brought down the Barisan Nasional government.
Yet GST has never really disappeared from public discussion. Supporters continue to argue that it is a more efficient and transparent tax system, while opponents remember the impact they associated with GST on the prices of everyday goods.
Recent changes have made the debate even more interesting. The government has increased SST rates and expanded its scope, while introducing other forms of taxation. The implementation of e-Invoicing has also prompted some critics to describe it as a “backdoor GST”.
There is therefore value in putting the politics aside for a moment and understanding what GST and SST actually do—and whether some of the strengths of GST can be incorporated into SST without bringing back the entire GST system.