MOF: Choice between SST, GST hinges on nation's economic goals

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KUALA LUMPUR: The choice between sales and service tax (SST) and the goods and services tax (GST) hinges on Malaysia's economic goals, administrative ...

: The choice between sales and service tax and the goods and services tax hinges on Malaysia's economic goals, administrative capabilities, and the need to achieve an optimal balance between revenue generation and the promotion of fairness and equity among the rakyat, said the Finance Ministry .

The MoF noted that the GST can potentially generate more revenue because of its broad base feature and is more transparent to consumers as it is explicitly shown in the final price. According to the ministry, the GST has no cascading effect as the tax levied on input is recoverable and not embedded in the cost, while there is “a cascading effect” in the SST because the tax element is embedded into the cost at each successive stage in the supply chain.

In the case of the SST, although exports are not taxed, the embedding of the tax element at each successive stage may increase the cost of exports, the report said. On tax evasion and compliance, the MoF said GST's self-policing mechanism can encourage better compliance and reduce tax evasion, but the SST is only imposed on certain goods and services. Therefore, the classification of the taxable status of an item or service may contribute to compliance issues, leading to tax evasion.

 

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