Good and Service Tax (GST) which was first announced by the Government of Malaysia in 2004 to be implemented in Malaysia on Jan 1, 2007, is now in the final stage of implementation study by the Government.
The GST addresses the need for the Government to ensure increased revenue flows in the coming years by expanding the tax base. Upon implementation of the GST, the existing Service Tax and Sales Tax in Malaysia will be abolished.
The GST will operate similarly to that in other countries with a GST or VAT (Value Added Tax) system. There will be two rates — a zero-rate which will apply to most goods and services exported from Malaysia, and a standard rate, yet to be announced, but expected to be less than 5%. In comparison, the GST rates of the closest neighboring countries are 7% in Singapore and Thailand and 10% in Indonesia.