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Malaysian Parliament tables Bills to repeal GST and re-introduce sales and services tax

[KUALA LUMPUR] Malaysia's new government has tabled Bills to repeal the highly unpopular goods and services tax (GST) and re-introduce the sales and services tax, as part of a move to fulfil its election promise.

The Finance Ministry tabled the Bills for their first reading in Parliament on Tuesday, with the abolition of the GST to take effect at a date to be determined by the Finance Minister.

The rates of the sales and services tax will also be fixed by the Finance Minister, though the rates will have to be approved by lawmakers in the Lower House.

With taxation falling under the purview of Finance Minister Lim Guan Eng, he will have the prerogative to determine which goods and groups of people are exempt from the sales and services tax.

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The ruling Pakatan Harapan (PH) coalition had promised to repeal the GST, a tax which the coalition lawmakers had called regressive due to its vast reach.

In June, the new government cut the GST rate to zero across the country.

The GST came into effect in 2015, with annual collection hitting RM44 billion (S$14 billion) last year.

Former prime minister Najib Razak introduced the GST at a rate of 6 per cent, to help raise government revenue, but the tax has been widely criticised by people for hiking the prices of goods, contributing to rising costs of living.

Najib insisted the tax is better than the sales and services tax (SST).

"GST is a much more superior tax system employed by more than 170 countries. The tax system will benefit the people in the long run," he told The New Straits Times earlier this month.

The opposition Barisan Nasional lawmakers have defended the GST, saying that it provides more transparency and efficiency.

Mr Lim conceded this but said the sales and services tax is less of a burden on the people.

"While SST is not as efficient, it has less of an impact on the people and that is what we are focused on," he said in Parliament on July 19.

With the new sales tax affecting a smaller range of goods, economists have forecast that inflation would dip but Malaysia's annual estimated tax collection would be reduced by half to RM21 billion.

THE STRAITS TIMES