The purchasing power of Malaysians will be boosted with the reintroduction of the sales and services tax (SST) in September, said KPMG Tax Services Sdn Bhd indirect tax adviser Tan Sim Kiat.

He said the SST was a single level tax compared with the just zero-rated GST, which was charged at every stage of business transaction.

“A single level tax will put less burden on consumers and boost spending power further, although the government might be on the losing end by foregoing extra revenue under the GST regime,” he told a press conference here today.

The press conference followed a briefing by KPMG and the Customs Department to business owners on how to file their taxes after the GST was zero-rated on June 1.

Last year, the government collected about RM44 billion in revenue from the implementation of the GST and with the SST in the pipeline, the government is only expected to accrue approximately RM30 billion in revenue.

However, to date, the SST mechanism that would be implemented is still unknown, as studies are still being conducted by the Finance Ministry and its related agencies.

The reimplementation of SST would also have to be tabled and passed in the July sitting of the Parliament, which would also repeal the GST Act 2014.

Tan also said the SST was a simpler and better tax model for Malaysia's current economic situation.

“Prices will drop. However, there are various factors that cause prices of goods to go up.

“Consumers need to understand that SST will only apply to the manufacturing and services industries. It will not affect everyone, compared with the GST which is broad-based,” he said.

For example, the tax-free period until Aug 31, 2018 will place an extra RM10.5 billion in the hands of Malaysians, and this would create a multiplier effect not only on consumers but also businesses, Tan said.

“People are spending more. This is a good sign that the purchasing power of the people has increased,” he said.

Asked if the SST would cause tax leakages and open the doors for middlemen to profiteer, Tan said that there was a formula used by the previous Domestic Trade and Consumer Affairs Ministry to curb excessive price hikes.

He said the GST tax system had created a trail for the Customs department to conduct checks and verifications, hence making it difficult to evade or even hike up prices excessively.

- Bernama