Malaysia to introduce SST after effectively scrapping GST

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The GST was introduced in India from July 1 a year ago, replacing a slew of indirect taxes - both Centre and states - across India, creating a seamless and uninterrupted chain of input tax credit that checked cascading of taxes.

Moody's said this week that Malaysia's government debt of 50.8 per cent of GDP is higher than the median for A-rated peers and without inflows from GST, would remain elevated and be negative for the credit rating.

"Fiscal reform is being implemented".

"The shortfall from GST which is to be zero-rated effective June 1, will be cushioned by specific revenue and expenditure measures that shall be announced in due course", it said in the statement.

Earlier, Prime Minister Tun Dr Mahathir Mohamad confirmed that he instructed the government to stop GST collection as well as impose a fixed petrol price.

Analyst Wong Wei Sum said this should lead to an immediate decline of 6% in prices of commercial properties (such as SoHo, SoVo, SoFo and shopoffices) from June 2018, making them more affordable. "Expenditure reduction will begin with rationalisation, efficiency measures and reduction in wastages", the ministry said in a statement today.

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A senior economist at Natixis Asia Ltd. Trinh Nguyen was of the view that this tax regime helped the country to grow when the oil prices were as low as $37 a barrel, "The GST was key to Malaysia during the worst period for the budget when oil had bottomed at $37 a barrel".

With the announcement of the change still fresh and with so many questions left to be answered, we hope to see more clarifications from official sources in the days to come.

If the new SST rate is 10%, as it was before GST came into play, we could be seeing an increase in auto prices compared to today's sticker prices.

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. We were reminded of this earlier this week by Edaran Tan Chong Motor's sales and marketing director Christopher Tan.

Another potential surprise for the auto buying public is that prices might not fall by exactly 6% come June 1. A cycle and a BMW can not be taxed at the same rate. Thus, within a quick time frame, buyers should be able to pay current prices sans GST.

"It is a question of how quickly you can bring (the SST) back".