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Malaysia introduces 6% GST 1 April 2015

  • Oct 26, 2013 | Richard Asquith

Malaysia introduces 6% GST 1 April 2015

The Malaysian Prime Minister has announced yesterday plans to introduce a Goods and Sales Tax (GST), similar to VAT, on 1 April 2015.  The standard Malaysian GST rate will be 6%. Foodstuffs will be largely exempt.  It will replace the existing Sales and Services Taxes.

Malaysia Sales and Services Taxes to be phased out 2015

The current Malaysian consumptions taxes, Sales Tax and Services Tax, were introduced in the 1970’s as simple consumption taxes. There is no right to deduct across the stages of production, which gives rises to compound tax, and opportunities for fraud.

Sales tax is applied to imports and locally produced goods for domestic consumption.  Some imported produce from countries within a regional free trade zone are exempt from Sales Tax on importation.  Most goods attract 10% Sales Tax, with a reduced rate of 5% for foodstuffs and other goods.

Service Tax is applied to most services.  There is some scope for an exemption from Service Tax for VAT Groups for related companies

Malaysian GST finally arrives

The reform and standard rate decision making has been protracted.  It was recently confirmed that Malaysian GST would miss the 2014 target.

Many emerging economies are also reforming their simple consumption taxes.  China is in the middle of a successful withdrawal of its Business Tax in favour of VAT.  India is still considering introducing a GST regime to update its complex VAT and CENVAT regimes.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara