The government will impose a lower goods and services tax (GST) rate rather than the current sales tax and service tax rates, if the GST materialises, said Prime Minister Najib Razak today.

NONE Najib, who is also the finance minister, said in implementing the GST, the government would replace the current sales tax and service tax while exemption would be granted to the lower-income group.

"The government is currently in the final stage of completing the study on the GST implementation, particularly towards identifying its social impact," he said while tabling the Budget 2010 in Parliament today.

He said the purpose of the study was also to determine if the GST needs to be implemented to stabilise government finance and would not burden the people.

Promote prudent spending

Najib said the government recognised that adequate revenue collection is vital to support rising expenditure as well as reduce the nation's increasing debt level and would take firm measures to strengthen its financial position.

To ensure that the present cash flow reflects current economic performance, Najib said the government has proposed that the tax assessment system for petroleum upstream activities be changed from the preceding year assessment system to the current year assessment system.

"The formal assessment system will also be changed to the self assessment system.

"In order to alleviate the tax burden of upstream petroleum companies, the government has also proposed that income tax for the year of assessment 2010 is based on income derived from 2009 and be allowed to paid in instalments within five years," he said.

To promote prudent spending, the government has proposed that a service tax of RM50 a year be imposed on each principal credit card and charge card, including those issued free of charge.

A service tax of RM25 a year will also be imposed on each supplementary card. This measure is effective January 1, 2010.