THE Government’s proposal to combine the existing Sales and Service Tax (SST) with elements of the Goods and Services Tax (GST) has come under fire from DAP’s Kepong MP Lim Lip Eng, who questioned why GST should not simply be redesigned and reinstated if its mechanisms are needed to make SST more effective.
In a statement today, Lim said the proposed hybrid approach raised a fundamental question: if SST ultimately needed to rely on GST-style mechanisms, why not reform GST and bring it back instead?
He said 176 countries had adopted GST, while Malaysia’s SST model was not replicated elsewhere internationally.
More significantly, he said no country was currently implementing the hybrid SST-GST model being considered by Malaysia, which he argued raised questions over its practicality.
“The logic is actually quite simple. If only some industries can get their previously paid taxes back, the 'tax on top of tax' will continue. If more and more industries can get their previously paid taxes back, the whole tax collection method will become more and more like GST.”
He said allowing manufacturers, service providers, wholesalers and retailers to claim refunds for taxes already paid would require the Government to introduce increasingly detailed rules governing deductions, refunds and other tax matters.
“Once manufacturers, service providers, wholesalers and retailers can get a refund of taxes they have already paid, the government will have to set more rules to deal with what can and cannot be deducted, tax refunds and other tax issues.”
Lim questioned whether the Government was genuinely improving SST or simply going through a lengthy and complicated process of reintroducing GST features into the existing system.
He also called for greater transparency over the Government’s projected SST revenue of RM59.6 billion in 2026, saying clear figures should be provided before any new hybrid taxation model is introduced.
He asked how much of the RM59.6 billion would ultimately be retained by businesses, how much would have to be refunded and how long refunds would take to process.
He also questioned how much revenue the Government would ultimately collect, which industries would continue to face additional taxation and how much additional administrative cost businesses would have to bear.
“If the government believes that the problem of SST will ultimately be solved by adding more and more GST, then the government should seriously consider directly restoring a more comprehensive GST, while strengthening supervision, speeding up tax refunds, and providing protection for low-income groups,” Lim said, adding, the name of the tax was less important than whether the system worked effectively.
“What tax is levied and what it's called are not the most important things. What really matters is whether this approach is effective.”
He cautioned the Government against creating a more complicated taxation system simply to avoid using the term “GST”.
“If GST is indeed more effective, then bring it back.” - September 5, 2026
