GST may debut at 5%, says tax expert

Thursday, 17 October 2013 10:00 

Prem Kumar Panjamorthy

The Malaysian government is expected to introduce the Goods And Services Tax (GST) at 5%, said Chartered Tax Institute of Malaysia president SM Thanneermalai.

He said in a recent interview that 5% would be the ideal introductory level for GST, as anything below the number will not help the government to widen its tax revenue.

Thanneermalai’s opinion differs slightly to the wide expectation from industries and economists of a 4% GST.

“Currently, the sales and service tax provides the government about RM4 billion annually. Even though GST is a more wider tax, it will not make an impact if it is introduced at 4%.

“Six percent would be a better number but 5% would be a good introductory level,” said Thanneermalai, who is also a member of the National Tax Review Panel.

He said the government should announce, as widely anticipated, an indication of GST implementation in the upcoming Budget 2014, as the environment is very timely.

“The tax review panel, the logistics and the Inland Revenue Board (IRB) are all ready. It is now on the hands of the government.

“And this time, it is more certain than ever, as the government seriously needs more money. The more they delay, the later would be the implementation of the tax,” he stressed.

The GST will replace a salesand- service tax of between 5% and 10%.

Asked if the small and medium enterprises (SMEs) are ready to adopt the new taxation mechanism, Thanneermalai said there will be definitely issues pertaining the acceptance of a new tax.

However, he said the government is mulling to provide incentives for SMEs to seek technological expertise’s assistance, in adopting GST.

A tax deduction or subsidy to acquire GST accounting technology, might also be given to SME to help them to buffer the incurring expenses, during the implementation of GST.

“It is my personal opinion that the IRB should not penalise any SMEs pertaining to GST technological glitches, unless it’s a proven fraud,” he said.

The Finance Ministry had previously said that the GST will only come into force 14 months after its announcement.

Thus, if announced in the upcoming budget, the new taxation mechanism will only be implemented in 2015, as the 14-month period is needed to enhance technological assistance and linkages to support the new tax system as well as to give grace period for industries and consumers to understand how it is implemented.

The GST was scheduled to be implemented by the government during the third-quarter of 2011, but has not yet been implemented.

Its purpose is to replace the sales and service tax which has been used in the country for several decades and to raise additional revenue to offset its budget deficit and reduce its dependence on revenue from Petroliam Nasional Bhd, Malaysia’s state-owned oil company.

The GST Bill was tabled for reading in the Parliament in December 2009 but its second reading, or igina l ly planned for March 2010, was postponed.