Published: Saturday October 26, 2013 MYT 12:00:00 AM
Updated: Saturday October 26, 2013 MYT 8:28:15 AM
THE Goods and Services Tax (GST) will be introduced on April 1, 2015, at a rate of 6%.
Prime Minister Datuk Seri Najib Tun Razak said the sales and services taxes would be abolished and these would be replaced by a single tax – the GST.
Najib said it was the right time to impose it as the country’s inflation rate was low, at only 2%.
He said with the introduction of the GST, the Government would be able to resolve weaknesses in the current taxation system such as the impact of double taxation, absence of full tax relief on exported goods and issues over transfer pricing.
“If we were to buy a carbonated drink in a restaurant today, we are paying double taxes – sales tax and service tax,” he pointed out. “With the GST system, consumers will only need to pay tax once, and the price of goods should be cheaper.”
Najib said the GST would not be imposed on basic food items such as rice, sugar, salt, flour and cooking oil.
Other goods and services exempted from the GST would be government services such as for the issuance of passports, licences, health services, school education and public transportation services such as buses, trains, LRT, taxis and highway tolls.
Najib said it was unfortunate that certain parties had attempted to confuse the public over the understanding of the GST.
“They claimed that when the GST is implemented, the prices of goods will rise, and that the poor and low-income group will bear the burden,” he said.
“More than 160 countries have already implemented the GST. This clearly demonstrates that the GST is a transparent, effective and fair tax system.”
Najib said the proposed GST rate of 6% would be the lowest among Asean countries, compared with 10% in Indonesia, Vietnam, Cambodia, the Philippines and Laos and 7% in Singapore and Thailand.
He also announced several forms of assistance for the public during the GST “transition period”, including a one-off cash assistance of RM300 to households that were BR1M recipients.
Individual income tax rates would be reduced by between one and three percentage points, moving about 300,000 people from the taxpaying bracket.
These measures would all be effective from 2015.
To help businesses, corporate income tax rate would be reduced by 1% from 25% ; while the income tax rate for SMEs would be reduced by 1% to 19% from the year of assessment 2016.
Najib also announced a GST Monitoring Committee to oversee the smooth implementation of the tax system.
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