Only Towkays Want GST?

01The Statement That Started It

During Ministerial Question Time, Prime Minister and Finance Minister Anwar Ibrahim was asked about bringing back the goods and services tax. His answer was blunt. Those pushing for GST, he said, are really asking to move the tax burden off businesses and exporters and onto the whole public.

He went further. Big business groups, he said, had raised GST at Budget dialogues. His worry was that the tax would end up on the consumer's receipt.

He also gave you a test for when GST could return: when the minimum income reaches at least RM4,000.

If you run an SME, you are probably asking two questions. Is that how the tax actually works? And should you care which system Malaysia uses?

Let us take the claim apart, line by line.

There are really two claims in that statement. First, that only business owners and big business want GST. Second, that GST shifts the tax burden onto consumers, while SST mostly stays with businesses. To test either, you need to know who actually bears an indirect tax.

02Who Really Pays a Consumption Tax

Here is the first principle every tax student learns. The person who hands the money to Customs is not always the person who bears the cost.

Under GST, which ran at 6% from 1 April 2015 until it was zero rated on 1 June 2018, tax was charged at every stage of the supply chain. Each registered business claimed back the input tax it paid. The only person who could not claim it back was you, the final consumer.

So yes. By design, GST lands on the consumer. That is not a flaw. That is the whole point of a value added tax.

Under SST, governed by the Sales Tax Act 2018 and the Service Tax Act 2018, sales tax is charged once, at the manufacturer or import level. Service tax is charged on a prescribed list of services. There is no general input tax credit.

What happens next? The manufacturer builds the tax into its selling price. The wholesaler marks up on top of that. The retailer marks up again. By the time the product reaches you, the tax is buried inside the price, often with margin added on top of it.

The consumer still pays. You just cannot see it on the receipt.

03Claim 1: Only Towkays Want GST

This one does not hold up well.

It is true that business groups like GST. Ask any finance manager why. Input tax credits remove the tax from the business cost base. Exporters get refunds. There is no tax sitting inside your raw materials, eating your margin.

But the supporters are not only towkays.

World Bank Malaysia lead economist Apurva Sanghi estimated that Malaysia gave up around RM19 billion in revenue in 2022 by staying on SST rather than GST. Local economists and think tanks have called for GST to come back to rebuild the revenue base. PKR MP Rafizi Ramli has also argued publicly that the rakyat would accept GST if they saw more in return.

So the support base includes economists, international institutions and voices from within the ruling coalition. Business wants it, yes. But it is not only business.

04Claim 2: GST Shifts the Burden to Consumers

This one is partly right, and the missing part matters.

GST does put the tax on the consumer. You see 6% on the receipt. Every ringgit is traceable.

SST also ends up with the consumer, through the price. In Parliament, the Prime Minister himself accepted that a small portion of SST is passed on to the rakyat. In practice, for taxed goods, most of it is. A business does not absorb a 10% sales tax out of goodwill. It prices it in.

Then there is cascading. Because SST has no general input tax credit, tax paid on a taxable service used by your business becomes a cost. That cost flows into your selling price. If your customer is also taxable, tax can be charged on a price that already contains tax. The Prime Minister acknowledged this too, noting that SST may be adjusted to deal with double taxation.

So the honest description is this. GST shifts the tax to the consumer openly. SST shifts much of it to the consumer quietly, sometimes with tax on tax.

05Where the Prime Minister Has a Point

To be fair, the case against GST is not empty. Here are the strongest arguments on his side.

First, coverage. A broad based GST reaches more of what a low income household buys. Even with zero rated basic food, a consumption tax takes a bigger share of a poorer family's income than a richer one's. Economists call this regressive, and it is not seriously disputed.

Second, cost of living. Introducing any broad tax while wages are flat is a real risk to household budgets. The RM4,000 minimum income test is his way of saying the timing is wrong, not that the tool is wrong.

Third, revenue. He said SST now collects about 3.2% of GDP, the same share GST collected in 2017. Recent figures back the trend. SST collection reached RM44.7 billion in 2024, and a parliamentary written answer estimated RM55.9 billion for 2025 after the 1 July 2025 expansion. GST collected about RM44.3 billion in 2017.

Now the counterpoints. Comparing ringgit collected across years ignores that the economy has grown. And the count of exempt items, about 2,000 under SST versus fewer than 750 under GST in his figures, does not by itself tell you who bears the burden. That depends on rates, coverage and how much tax cascades through prices.

06What This Means for Your Business Today

The Prime Minister was clear. The system remains SST. So plan for SST, not for a GST that may or may not come.

Start with your cost base. If you buy taxable services such as rental of business premises or equipment, construction works, or fee based financial services brought in by the 1 July 2025 expansion, that service tax is now a cost you cannot claim back. Check whether your pricing has caught up.

Next, check your registration position. The expansion added new taxable service groups with their own rates and registration thresholds, and some thresholds have since been revised. If your revenue from a newly taxable service is growing, monitor it on a rolling 12 month basis.

Finally, keep your systems ready. If GST does return one day, businesses with clean e-Invoice data, proper supplier records and good input tracking will adapt fastest. That work pays off under SST anyway.

This article is general educational content and is not tax advice for your specific circumstances. Please consult a licensed tax agent before acting on it.