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Malaysia Resets Goods and Services Tax to Zero From June 1, 2018

The new government in Malaysia has moved rapidly to deliver on its promise to abolish the 6% goods and services tax (GST), announcing a zero rate beginning June 1, 2018.

In an official statement by Ministry of Finance earlier today, the new rule will be applied nationwide starting from the date that we've mentioned above.

The ministry said the GST will no longer be imposed at a rate of 6 per cent from then on, adding that this will be subject to further notice. This excludes goods and services that are now GST exempted.

"As such, all registered traders should abide by the zero-rating directive".

So what does this mean to the rest of us?

All this comes in the wake of Pakatan Harapan's win in the recently concluded GE14, where in their pre-election manifesto they pledged to completely do away with GST within a 100 days should they win, and return the Sales and Services Tax which the GST replaced in 2015.

The new government has said that its income would not be affected by doing away with the tax.

The MoF said the adjustment does not cover those goods and services that are already exempted from GST. Tan Sri Zeti Akhtar Aziz, who is one of the five-member Council of Eminent Persons had mentioned that the decision to abolish GST is final and work is in progress towards abolition.

But the Malaysian parliament would need to repeal the GST Act 2014 before the consumption tax could be totally removed.

Some analysts fear that the decision would worsen Malaysia's fiscal position, including blowing up the budget deficit, now at 3.1% of GDP.

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