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GST in Malaysia

Updated: Nov 11, 2022

The heart of an economy comes from consumption, it is the force that moves money from one person to another, so of course the government will want a piece of that juicy pie! This comes in the form of consumption taxes, an indirect tax levied on the goods/services when they are bought/used.

Right now it takes the form of Sales and Service Tax (SST) in Malaysia, but back in the days of 2015-2018, there was another consumption tax that took over SST, called Goods and Services Tax (GST), also known as Value Added Tax (VAT) in other countries.

But what was GST? Why was it abolished? Was it really deserving of such a fate? That is the topic of this article, a history lesson and evaluation of GST, the tax that was abolished faster than it was introduced.

The workings of GST

Before we could discuss the history of and evaluate GST in Malaysia, we must 1st understand how it all functions.

VAT (a.k.a. GST) is a consumption tax levied on the transaction price of goods and services. The system involves almost every merchant in the country and is ultimately borne by the final consumer. This is facilitated through the recording of GST on inputs (input taxes) and GST on outputs (output taxes), where only the difference of which is required to be paid by or even received by merchants at every taxable period, effectively only collecting the value added by the merchant from

GST in Malaysia adapts this framework identically, where each merchant collects GST on the value they added on behalf of Royal Malaysian Customs (RMC), and the cost of GST is passed down to the end consumer.

The implications of GST

Now that we understand the workings of GST, you might be wondering, why the hassle? The recording is quite fancy, requiring merchants to ensure that input and output taxes are accounted for (in the form of tax invoices), and the net effect is much the same, making consumers bear the tax, be it through GST’s system, or by merchants passing along the cost to its customers. Well, a few benefits arise: