MA Sivanesan, the deputy undersecretary (Indirect Tax & GST Policy Sector) at the ministry’s tax division, said this was due to the role played by the consumption tax in providing stability to government revenues.
“This is compared to commodities like petroleum, where the price fluctuation is difficult to control due to external factors. So relying on oil revenue is not a wise choice,” he told Bernama in an interview here yesterday.
He said abolishing the GST would be an inappropriate and backward move as its original objective was to reduce dependence on petroleum revenue.
“If we were to look back to 2016 when the world oil price dropped to about US$30 per barrel, it had an impact of RM30 billion on our economy. In this regard, relying on oil revenue is not the best way,” he said.
In fact, he added, the effectiveness of the GST which has been adopted in over 160 countries had attracted at least three more countries to implement it after Malaysia: India, Saudi Arabia and the United Arab Emirates.
Sivanesan said it was inaccurate to blame GST solely for the rising cost of living as a post-implementation study conducted in 2015 had found that this contributed less than 1% to the tax.
He said other factors included the demand for goods and services exceeding supply, and the exchange rate which affected the price of imported products.
“We have to admit that most of the goods we consume are imported. When the ringgit declines, it impacts prices.”
Sivanesan said the GST model adopted by Malaysia was also aimed at ensuring the exemption of certain basic goods and services, including food and transportation.
He said the 6% rate was “neutral” and not aimed at drastically boosting government revenue. In fact, he said, it was to compensate for the sales and services tax (SST) which was abolished to make way for the GST.
“The government is very careful to ensure that the rate is not burdensome and the revenue collected is neutral compared to the previous SST collection,” he said.
To ensure that low and medium-income groups were not burdened by the GST, he said, the government had implemented various initiatives including the 1Malaysia People’s Aid (BR1M) for eligible groups instead of providing subsidies across the board like before.
The government had also reduced income tax rates with the objective of increasing households’ disposable income, thereby maintaining the people’s purchasing power, he added.
He said the GST structure also provided relief and zero-rated 31 categories of goods and services after taking into account the socioeconomic situation of the people.
Sivanesan said even though several international organisations, including the World Bank and the International Monetary Fund, had called for the scope of relief and imposition of zero-rated GST to be reviewed, the government presently did not have such plans.
“We find that the list of zero-rated or exempted items has a very good impact on tax progress. It means the low-income group will remain protected and not burdened by the GST.”
He added that the government had no plans to raise the GST rate at the moment. However, the tax could be reviewed if there was a need to raise or lower the rate based on economic factors, he said.
“If one day we find that our economic level is so good and the people’s income has improved, we may look into the need to review the GST rate.”
He said one of the countries that had done so was Thailand which lowered its GST rate to 7% from 10% in the late 1990s due to economic issues.
Sivanesan said so far, the number of businesses that had registered for the GST had risen to 70,000, nearly double the number that registered when the tax was first implemented in 2015.
In terms of collection, he said the GST collection grew year-on-year to RM44.3 billion in 2017 from RM42 billion in 2016 and RM27 billion in 2015.
The GST contribution to the government revenue also rose to 20% last year from 16% in 2015, while the previous SST contribution was only around 8%, he said.