The government plans to impose goods and services tax (GST) at four percent, Second Finance Minister Ahmad Husni Hanadzlah said today.

"We are replacing the current sales and services tax, which is currently at five to 10 percent," he told reporters at the Culture, Ideas and Values Workshop organised by Foundation For the Future at Country Heights Resorts in Kajang.

He said the GST implementation was important for the country's future.

"The revenue source must be sustainable. If we can get sustainable revenues, we can get a good budget," he said.

He said the Consumer Price Index (CPI) would not increase as a result of the GST implementation.

Some selected items especially essential goods like rice, sugar, cooking oil and flour as well as domestic transportation would not be subject to GST.

New taxes necessary

Husni said the Bill on GST would be tabled in Parliament for the first reading this year while the second reading in March next year.

GST would be implemented 18 months after the second reading.

najib and budget Prime Minister Najib Abdul Razak had yesterday said that the Bill will be tabled by Dec 15 .

The government expected an additional RM1 billion revenue annually after the first year of its introduction.

The current sales tax is projected to raise RM7.8 billion in 2010 out of a total RM148 billion in revenues, according to government data.

The tax is aimed at reducing the government's dependence on revenues from state oil giant Petronas which accounts for over 40 percent of revenue.

The country's budget deficit will hit a more than 20-year high of 7.4 percent of gross domestic product this year with the government also pledging to bring down the deficit to 5.6 percent of GDP in 2010 by reducing subsidy bills for fuel and good.

Living costs to spike

The plan drew immediate criticism from opposition lawmakers who said it will cause living costs to spike.

Charles Santiago from the Democratic Action Party (DAP) which is a member of the Pakatan Rakyat opposition alliance said the government needed to release more details about the shake-up.

"There is a sense of caution because it could have an impact on the lower and middle classes, particularly in food, health care and clothing," he told AFP .

Opposition legislator D Jeyakumar from the Socialist Party warned that "the GST percentage will start low but will increase over the years."

"It is definitely a bad move. The government is attempting to shift the taxes from the rich to the ordinary people," he said.

- Agencies