Good news for both Malaysian consumers and tourists. As promised during his campaign for election, the new Mahathir government announced to abolish the Goods and Sales Tax starting June 1, 2018.
According to an official statement released on Wednesday by the Malaysian Ministry of Finance, the Goods and Services Tax will be zero-rated effective June 1. The Finance Ministry said the change goes into effect nationwide and will remain until further notice.
Only items which are GST-exempted will not be zero-rated.
“As such, all registered traders should abide by the zero-rating directive. At the same time, registered traders are also subjected to all current regulations, among which involve the issuance of tax invoices, submission of tax returns within the specified period and input tax credit claims.
“Traders must also ensure that the prices of goods and services set are in accordance with the Price Control and Anti-Profiteering Act 2011,” said the ministry.
The GST abolition is due to boost confidence in consumption as it is due to translate into a lowering of prices for all goods and services in Malaysia. It will particularly act as an incentive for tourists coming to the country as shopping will be a bit cheaper…
In an interview with Malaysia news agency Bernama, Prime Minister Mahathir Mohamad expressed his confidence that ” the country has enough money to remove the much-criticised tax”.
Dr Mahathir believes that with good financial management, the country would have sufficient money to remove taxes.
“The lack of funds in the government is not because of insufficient income, the current (national) income is three times higher than during my time as prime minister (before). However, funds were misused. They were used to buy support for former prime minister Najib Razak. This is why we have less money,” he said.
Another populist measure announced by the government is the reintroduction of fuel subsidies. But experts feel worried that the GST removal and the reintrocution of the subsidies will widen Malaysia’s fiscal deficit. So far, the announcement contributed to weaken the value of Malaysian local currency, the Ringgit.