Firdaos, a Fellow in Economics at the Institute of Strategic and International Studies Malaysia (Isis), said GST should, ideally, be focused on standard-rated items and zero-rated items only.

Zero-rated items are subject to a zero per cent GST rate as businesses are entitled to claim tax credit.

Exempt supplies means no GST will be charged on these goods and services, but companies cannot claim the GST they pay on assets, purchases or expenses for their businesses.

“When it comes to exempt-rated items, suppliers cannot pass on the GST to the consumers, so what do they do?”
“If they’re generous enough, they will absorb them, otherwise they will pass on the cost to consumers by hiking up the prices of their goods and services,” Firdaos told FMT.

Therefore, Firdaos said, he did not agree with the exempt category as it would lead to suppliers taking on losses or consumers forking out more due to the artificial increase in prices.

An exempt category, he said, would cause difficulty in future whenever an item was taken off the exempt-rated list and moved to the standard-rated list, as it would result in an outcry and more adjustments.

“It is better to just categorise items as standard and zero-rated so that people can adjust once and for all.”
He added that an additional category to the standard and zero-rated category also cost taxpayers more as more resources would be needed to ensure compliance by businesses.

The money saved from eliminating the exempt-rated category, Firdaos said, could be put back into programmes to benefit the people.

“We need to simplify it. There is nothing wrong with the GST, countries around the world have GST.”

In tabling Budget 2017 last month, Prime Minister Najib Razak announced that the government had collected almost RM30 billion in GST between April 2015 and October 19 this year.

Najib, who is also finance minister, said there would be no increase to the six per cent GST rate.