SAPA: Reintroduce a simplified GST for a fairer, more efficient tax system
KOTA KINABALU (June 12): The Sabah Association of Professional Accountants (SAPA) understands the government's ongoing efforts to broaden Malaysia's tax base and increase revenue collection.
However, in light of the recently announced Sales and Services Tax (SST) expansion effective 1 July 2025, SAPA believes there remains an urgent need to consider reintroducing a simplified Goods and Services Tax (GST) as a longer-term solution to achieve efficiency, fairness, and economic sustainability.
SAPA acknowledges several positive and balanced elements in the revised SST framework, including:
The continued exemption of residential property rentals, which protects homeowners and tenants from additional financial burdens.
The decision to apply SST on private healthcare services only to foreign nationals, ensuring that Malaysians — especially those in the B40 and M40 income groups — continue to enjoy tax-free access to essential and urgent medical care.
The exclusion of basic necessities such as rice, vegetables and medicines, which helps shield vulnerable communities from inflationary pressures.
These targeted exemptions demonstrate the government's intention to balance revenue needs with social protection, and SAPA supports such thoughtful measures.
However, SAPA remains concerned that the broader inclusion of construction services and commercial property leases under SST will have disproportionate effects on Sabah, where the business environment is already challenged by higher logistics costs, underdeveloped infrastructure, and geographical fragmentation.
Construction services: Taxing this sector will raise overall project costs for both public and private initiatives — affecting commercial development and deterring investment in rural and semi-urban areas.
Commercial property leases: The new SST scope covers shoplots, retail outlets, and office spaces — a move that risks escalating rental costs for SMEs, many of which are the backbone of Sabah's economy. This added cost could be passed down to tenants.
SAPA calls for the government to consider reintroducing a simplified GST at say a 3% flat rate, with minimal technical complications. GST, which is used in more than 170 countries worldwide, is a more modern and effective consumption tax system. Its advantages include: Eliminating cascading tax effects via input tax credits; Improved transparency and tax audit trails; A broader, more equitable tax base that supports long-term fiscal resilience; Better alignment with international best practices — crucial for attracting foreign investment.
Importantly, a lower-rate GST would be less burdensome to consumers than the current dual-rate SST model and can be designed to exclude essential goods and services, similar to the existing SST exemptions.
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