Malaysia to drop GST next month, fulfilling election pledge

Abolishing the GST was a key promise made by the Pakatan Harapan coalition should it win the May 9 general election.
Abolishing the GST was a key promise made by the Pakatan Harapan coalition should it win the May 9 general election.PHOTO: AFP

KUALA LUMPUR • Malaysia's goods and services tax (GST) will be reduced from 6 per cent to zero per cent from June 1, the Finance Ministry said yesterday, just hours after Prime Minister Mahathir Mohamad said he had instructed the government to stop collecting the deeply unpopular tax.

"This move to impose the GST at a zero rate takes effect starting from June 1, and applies to the whole country until further notice," the ministry said in a brief statement.

Abolishing the GST was a key promise made by the Pakatan Harapan coalition should it win the May 9 general election.

"All registered traders must follow the decision of the zero rate now. At the same time, registered businesses are still subjected to all current regulations," said the ministry.

The public had widely blamed the GST - introduced in April 2015 - for spiking the prices of goods and services, with little government enforcement to prevent restaurants to supermarkets from raising prices beyond the 6 per cent rate.

The "zero per cent" move means that the GST will be effectively abolished. But the Malaysian Parliament would need to repeal the GST Act 2014 before the consumption tax can be totally removed.

  • 6% The goods and services tax (GST) in Malaysia currently. Come June 1, it will be adjusted to zero.

    $14.2b What the previous government collected in GST last year.

The previous government collected some RM42 billion (S$14.2 billion) from the GST last year, saying this helped to boost government coffers at a time when Malaysia's other main source of revenue, the sale of oil and gas, was deflated due to weaker global petroleum prices in the last few years.

The new government under Tun Dr Mahathir has said it would bring back the Sales and Services Tax to replace the GST.

A version of this article appeared in the print edition of The Straits Times on May 17, 2018, with the headline 'Malaysia to drop GST next month, fulfilling election pledge'. Print Edition | Subscribe