GST to start at 6pct from April 2015

The government will introduce the much-criticised goods and service tax (GST) at 6 percent starting April 1, 2015

The GST will replace the sales and service tax and will be introduced in tandem with cuts in corporate and personal income tax.

Announcing this in his Budget 2014 speech, Prime Minister Najib Abdul Razak said that personal income tax will be cut between 1-3 percentage points.

“This means that households earning RM4,000 a month or less no longer have to pay tax,” he said.

Households earning less than RM3,000 a month, who are already recipients of BR1M will also receive a one-off RM300 to cushion any impact from the introduction of GST.

To further protect households from any adverse impact, Najib said essential food items like “rice” and “belacan” will be exempted from GST, as will public transportation and education.

Restructuring tax structure

Restructuring of the income tax structure will also see the maximum personal income tax band of RM100,000 increased to more than RM400,000.

The rate will also be stretched from a single rate of 26 percent for those earning RM100,000 and above to 24 percent, 24.5 percent and 25 percent depending on the band.

Corporate income tax will also be cut by 1 percent starting 2016, while cooperative taxes will be reduced 1-2 percent starting 2015.

Businesses will also get tax exemptions for GST related infrastructure and subsidy for GST-related training.

The announcement at the Dewan Rakyat was met with loud murmurs from the parliamentarians, including the Opposition bench whose shadow budget does not include the GST.

Although the GST expands Malaysia’s narrow tax base, the opposition has argued that it is oppressive to introduce it now as only 10 percent of the workforce earn enough to pay income tax.