Malaysia considers hybrid tax reform combining GST and SST

Malaysian Prime Minister Anwar Ibrahim has announced that the government is considering a reform of the national consumption tax regime. The proposal involves studying a hybrid system that could integrate elements of the Goods and Services Tax (GST) with the current Sales and Service Tax (SST) to create a more progressive and efficient taxation structure.

Anwar, who also serves as Finance Minister, noted that while the GST is a transparent and efficient collection system, he remains concerned about its impact on low-income citizens. The Cabinet has directed the Ministry of Finance, specifically Finance Minister II Datuk Seri Amir Hamzah Azizan, to conduct a comprehensive study and prepare a report for further discussion. The government aims to avoid the weaknesses of the current SST while learning from the previous implementation of the GST.

The Federation of Malaysian Manufacturers (FMM) has welcomed the move, suggesting that incorporating GST-style features could help mitigate cascading taxes, where taxes are repeatedly imposed at different stages of the supply chain. Meanwhile, political representatives have called for Budget 2027 to include practical relief for middle-income (M40) households to address rising living costs.