SST simpler, has less impact on low-income group than GST: Lim

PETALING JAYA: Finance Minister Lim Guan Eng, in defending the government's decision to implement the Sales and Services Tax (SST) regime, promised that the structure will be simpler and tweaked to ensure that the impact on the lower income group will be proportionately less compared with the Goods and Services Tax (GST).

Lim said the Finance Ministry has undertaken a comprehensive review of the SST with the help of accounting firm PricewaterhouseCoopers (PwC) tax consultants to simplify the process.

"PwC will help rationalise tax collection and reporting requirements to ensure that the SST will be even more efficient and less bureaucratic than the GST and the old SST system. PwC will ensure the SST imposed from Sept 1 to be simpler, less cumbersome, prevent leakages and loopholes."

He said the details of the improvements will be announced when the new SST bill is tabled in Parliament during the current sitting.

Lim said in a statement today that the SST, which will come into effect on Sept 1, will be less of a burden to the people compared with the GST introduced by the previous administration.

"How could the SST burden the people more than the GST when the expected collection from the SST is estimated at only RM21 billion for a full year, while the GST had expected to collect RM44 billion in 2018, according to the previous government's projection?" he asked.

In rebutting claims made by former prime minister Datuk Seri Najib Abdul Razak that the SST will be more burdensome to the people, Lim said the transition from SST to GST will indeed "return" RM23 billion to the rakyat.

Unlike the GST era, Lim said, not all products will be subjected to the SST as the 10% sales tax rate only applies to selected manufactured and imported products. Similarly, the 6% service tax applies to only selected services.

On claims that reverting to the old tax system would result in a higher tax rate of 16% (10% sales tax and 6% services tax) is higher than the 6% GST, Lim said one can't simply add up the sales tax and services tax, which would be equating apples with oranges.

"The sales tax is imposed on manufacturers' and importers' price, while the GST is imposed on the final consumer price. Hence it is wrong to claim that a '10% sales tax is higher than a 6% GST'," he said.

"For example, a manufacturer imposes a 10% sales tax (RM0.10) on a can of soft drink manufactured for RM1.00. However, when the same can is sold to a consumer at 7-Eleven for RM2.00, a 6% GST of 12 sen would have been imposed. In this case, it is clear that a 6% GST at RM0.12 would be higher than a 10% SST," he added.