| November 1, 2013
The government will rake in more than RM30 billion to its coffers annually as a result of the newly proposed 6% Goods and Services Tax (GST).
The newest tax income, proposed to come on stream in April 2015, will likely double current revenue derived from Sales and Services Tax, which stands at about RM15 billion now.
KPMG Tax Services Sdn Bhd said for the first nine months of its implementation alone, the GST has the ability to raise up to RM25 billion in collections.
“We should be able to get at least a 20% increase in tax collection, which is about RM9 billion to RM10 billion.
“The tax collection efficiency will also be enhanced as almost all businesses, especially from the medium-scaled enterprises that will have to register themselves with the authorities to impose GST,” said Khoo Chin Guan, KPMG’s head of tax. Malaysian businesses should start preparation for the transition into GST now, although the 17 months period allowed appears to be slightly long, he told reporters in Petaling Jaya yesterday.
The GST is in line with the government s commitment to reduce its budget deficit, with the view of achieving a balanced budget in 2020.
The government had projected its budget deficit to dwindle to 3.5% of gross domestic product next year, from the current 4%.
The government’s 2014 revenue is estimated at RM224.1 billion, of which income taxes are expected to contribute RM125.7 billion while indirect tax collection is estimated at RM38.8 billion.
Prime Minister Najib Tun Razak was widely expected to announce a definite timeline of GST in Budget 2014, however, the 6% introductory level caught many quarters by surprise.
PricewaterhouseCoopers had suggested the government come up with a 6% GST, to create a more feasible effect to the government’s coffers and the economy.
Items which will be exempted from GST are rice, flour, vegetables, sugar, fish, chicken, salt, cooking oil, eggs, beef, chicken, mutton, spices, cencaluk, budu and belacan.
Essential services such as public transport, financial services and education will also be exempted.