PM: SST improvements possible, GST ruled out

KUALA LUMPUR: The government is prepared to make targeted changes to the Sales and Service Tax (SST) system to address cases of double taxation, Prime Minister Datuk Seri Anwar Ibrahim said.

However, Anwar, who is also finance minister, maintained that the government would retain the SST rather than reintroduce the Goods and Services Tax (GST).

"If there are specific cases involving elements of double taxation, we can make amendments.

"I am not dogmatic about economics. The system will remain SST, but we can make one or two adjustments to improve it," he told the Dewan Rakyat.

He was responding to a supplementary question from Datuk Seri Dr Ronald Kiandee (PN-Beluran), who raised concerns about the cascading effect of the SST, where taxes imposed at different stages could increase costs for businesses and consumers.

Ronald said the GST's input tax credit mechanism could help address such issues and questioned whether the government's decision to retain the SST was driven by political considerations rather than economic factors.

Anwar rejected the suggestion, saying the government was willing to consider improvements to the existing tax system.

He said the main argument advanced by GST supporters was that the tax would generate substantially higher revenue.

However, he pointed out that the SST currently contributed revenue equivalent to 2.2 per cent of gross domestic product (GDP), matching the contribution recorded under the GST in 2017.

"SST now generates 2.2 per cent of GDP. That is the same figure as GST in 2017.

"So there is no basis to claim that introducing GST would increase revenue."

Anwar also highlighted differences in the number of businesses covered by the two systems.

He said approximately 700,000 businesses were affected by the GST in 2018, compared with 130,000 under the SST this year.

He acknowledged that businesses had raised concerns about double taxation during government engagement sessions.

However, he said such concerns could be addressed through specific adjustments without replacing the entire taxation system.

Anwar said the administration would continue examining proposals to improve the SST while ensuring that taxation did not place an excessive burden on ordinary Malaysians.

The GST, a multi-stage consumption tax, was introduced in April 2015 at a rate of six per cent but was abolished and zero-rated on June 1, 2018.

It was replaced by the SST on Sept 1, 2018, in line with the manifesto of the then Pakatan Harapan-led administration.