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Malaysia Not Cancelling GST

Friday, March 12, 2010

After a government meeting, Malaysia’s Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah, has rejected any suggestion that the proposed introduction of a goods and services tax (GST) has been cancelled.

The GST would be in substitution of Malaysia’s existing sales and services taxes, which are based on specific goods and services. Being more broadly based, it has been proposed that the GST will be able to be applied at an initial 4% rate – lower than the current sales tax and services tax rates – but would still generate some MYR1bn (USD301m) in additional annual taxes for the government’s coffers.

The Second Finance Minister said that, while there has been some discussion within the government as to whether the GST has been understood within the country, and whether it will be ready for implementation as planned in the middle of next year, there has been no decision made contrary to its planned implementation. It is expected to continue its present course through parliament.

There has been some discussion on the GST’s possible effect on inflationary pressures in the country. However, the government has already said that some 40 selected basic goods and services would be GST-exempt.