The new Prime Minister of Malaysia, Yang Amat Berhormat Tun Dr. Mahathir bin Mohamad, has reaffirmed the intention of the country's new Government to abolish the Goods and Services Tax (GST) and to replace it with a version of the Sales and Service Tax (SST) that was in effect prior to the introduction of GST. GST came into effect on 1 April 2015.

At this stage, very few details are available about the proposal, the transition process and the final framework any new tax will encompass. The previous SST was a single-stage indirect tax, imposed in most cases at the manufacturing level (goods) or consumption level (services). It was relatively limited in its application when compared to GST. There was also no recovery of SST incurred by businesses nor an input tax offset, unlike with GST. The mechanism of SST operated very differently from that of GST and any return to SST or a similar sales tax will be significant across most sectors, even if, ultimately, the tax applies to a narrower list of goods and services than GST, and fewer taxpayers are required to report it.

Issues to be considered include:

• Transition from GST to SST in terms of reporting and compliance
• Processing of outstanding GST refunds
• Range of services and goods that will be subject to the new SST
• Pricing impact on businesses
• Introduction of price control and anti-profiteering regulations
• Managing ongoing GST audits and GST enforcement activities
• SST impact on e-commerce and the digital economy
• Impact on businesses' accounting and finance software during the transition and going-forward
• Process to de-register from GST and register for SST

Even if the GST law is abolished, taxpayers should note that obligations for GST are likely to remain for a period of seven years. Therefore, companies should continue to pay attention to their GST reporting and to carry out periodic reviews as part of their overall GST risk management processes, as a detailed GST audit may be expected upon the filing of the final GST return.

Future Alerts will report on this significant change to the Malaysian indirect tax environment.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Consultants Sdn Bhd, Kuala Lumpur

• Yeoh Cheng Guan, Malaysia Indirect Tax Leader
  cheng-guan.yeoh@my.ey.com
• Aaron Bromley
  aaron.bromley@my.ey.com
• Jalbir Singh Riar
  jalbir.singh-riar@my.ey.com
• Lindsey Cruickshanks
  lindsey.cruickshanks@my.ey.com
• Aljo Barias
  aljo.barias@my.ey.com
• Joel Conson
  joel.conson@my.ey.com
• Meynard Sardalla
  meynard.sardalla@my.ey.com

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ATTACHMENT

PDF version of this Tax Alert