Tourists Should Rush to Enjoy Three-Month Zero Tax in Malaysia

Malaysia, GST, SST

Kuala Lumpur city centre

The abolition of GST on June 1st is likely to boost consumption and travellers should then rush to enjoy a three-month hiatus in taxation. Come September 1st, the government already announced to put in place a sales and services tax (SST) which however should not impact in the same way consumers.

According to a reasearch done by KPMG Tax Services, some RM11 billion (US$2.3 billion) will be put in the hands of Malaysians during the current three-month tax holiday period. On June 1st, the governement decided to slash the rate of the Goods and Services Tax (GST) from 6% to 0%. following the zerorisation of the goods and services tax (GST).

According to KPMG Tax Services, consumers’ purchasing power is expected to improve after the GST is zero-rated, leading to a significant multiplier effect within the domestic economy.

“Based on the RM42bil GST revenue collected in 2017, Malaysians have paid about RM3.5bil on average for the consumption tax monthly. Now that the sales and services tax (SST) will only be introduced on Sept 1, we expect Malaysian consumers to have an extra RM3.5bil to spend per month from June to August.

“With no tax being paid on the goods and services in the three-month period, we are likely to see more spending power among the rakyat,” KPMG advisor Tan Sim Kiat told reporters after KPMG’s workshop on the transition from GST to SST regime.

Talking to the Star newspaper, the advisor indicated that even with the arrival of the Sales and Services Tax from September 1st, the effect would be not so much felt by consumers. The Malaysian government still needs to announce how the SST regime will be implemented.  The biggest difference between SST and GST is that the SST taxation will only apply at some stage of the supply chain while the GST was implemented at all stages of any business transaction.

Prior to the introduction of 6% GST back in April 1, 2015, the country practised the SST regime for over three decades.

“A single-level tax will place less burden on consumers and boost spending power, although the government may be on the losing end by forgoing the 6% GST revenue.

“The government can re-use the SST model introduced in the 1970s for an easier implementation and to reduce the monetary impact on the rakyat. However, if the government seeks to increase its revenue from SST, it can tweak the model by raising the tax rate and expand the coverage of goods and services under the tax regime, among others,” Tan explained to the Star.

However, for shopaholics, it is an excellent time to book a ticket and fly into Malaysia over the next two months and a half to come!