Manufacturers in Malaysia Are Urging Putrajaya to Reinstate GST and Prioritise Economic Recovery
Given the weak domestic and external environments caused by Covid-19, priority should be given to strengthening the economy and restoring more favourable business conditions.
This is according to the Federation of Malaysian Manufacturers (FMM). This situation is concerning because the debt servicing burden is significant, accounting for 17.2 per cent of total projected revenues for the year.
A Manufacturing Concern
Malaysia’s debt was expected to rise further, reaching 66 per cent of GDP by the end of 2022, up from 61 per cent in 2021 and 60.7 per cent in 2020. With no consistent inflows but high outflows of government expenditure due to increased allocations for Budget 2022 stimulus and recovery initiatives to assist the country in recovering from the effects of the pandemic and movement control order.
FMM is welcoming the announcement that the Goods and Services Tax (GST) may be reinstated by reviewing the shortcomings of the current sales and services tax (SST) system and improving on the former GST system implemented in 2015.
A Bid to Reintroduce GST
FMM has been a strong supporter of the GST as a more transparent and effective tax regime than the SST, with over 160 countries adopting it due to its fair tax structure. More importantly, because no GST is imposed on exported goods and services, Malaysian export prices will become more competitive on a global scale, and the GST incurred on inputs can be recovered along the supply chain.
According to a survey conducted by FMM on the reintroduction of the GST in May 2020, 499 companies that responded expressed strong support for the GST to replace the current SST. Manufacturers have also proposed changes to the GST to make it more consumer- and business-friendly. This includes lowering the GST rate to 3.0-4.0 per cent to improve business conditions, which would lead to increased investments and job opportunities, as well as higher disposable income for the people.
When the tax system is reintroduced, the survey findings proposed improvements such as ensuring a proper mechanism is in place to monitor price control and anti-profiteering in the market.
Start a Manufacturing Business in Malaysia
Despite the ups and downs, Malaysia’s manufacturing sector still remains the key to industrial output growth. If you would like to find out more about starting a manufacturing business in Malaysia, see our list of Malaysia Company Registration Packages in Malaysia for more information.