Govt Retains SST, GST Not An Option Amid High Cost Of Living - Amir Hamzah
KUALA LUMPUR, Oct 29 (Bernama) -- The federal government will continue to implement the Sales and Service Tax (SST), as the Goods and Services Tax (GST) will not be considered due to the ongoing burden of the cost of living.
Finance Minister II Datuk Seri Amir Hamzah Azizan said the government would continue to improve the SST to reduce the impact of cascading taxes and simplify compliance.
He said the SST also provided room for a more progressive and targeted approach.
“The government can choose which goods and services to tax while exempting essential items. Although some of the tax may be passed on through prices, the scope of taxation can be determined with the people’s affordability in mind,” said Amir Hamzah during the Supply Bill (Budget 2027) policy-level winding-up debate for the Ministry of Finance (MoF) in Parliament today.
He explained that the GST tended to be regressive because lower-income groups spent a larger proportion of their income on goods and services.
“In other words, even at the same tax rate, the burden relative to income is heavier for the people, particularly the B40 and M40 groups.
“Therefore, any additional revenue must be assessed alongside the burden borne by the people,” he said.
According to the Fiscal Outlook 2027, SST collections are estimated to rise to RM67 billion in 2026 from RM55.9 billion in 2025. They are projected to reach RM73.3 billion in 2027, an increase of RM17.4 billion over two years.
Amir Hamzah said SST collections currently account for three per cent of gross domestic product (GDP), the same level recorded by the GST in 2017.
This means replacing the SST with the GST would not necessarily generate additional revenue, but would instead shift the tax burden entirely from businesses, including exporters, to the people, he emphasised.
“This increase demonstrates the SST’s ability to generate revenue to finance the country’s needs.
“At the same time, the government has the flexibility to determine which goods and services are taxed on a targeted basis while exempting essential items,” said Amir Hamzah.
He said the government recognised GST’s advantages in collection efficiency, transparency and the input tax credit mechanism. However, the choice of tax system must take into account the people’s ability to pay.
On compliance, he said nearly 700,000 businesses were registered under the GST in 2018, compared with only about 130,000 under the SST in 2026. This means more businesses would have to bear compliance costs under the GST system, said Amir Hamzah.
-- BERNAMA