Malaysia follows a single GST rate of 6 percent for all goods and service.

Malaysia, the last country to have implemented GST before India, has decided to scrap the Goods and Services Tax from June 1, barely three years after its roll-out, even as India is gung ho on prospects of its biggest indirect tax reform. The newly appointed government in Malaysia announced on Wednesday to bring down goods and services tax to zero from June 1, effectively abolishing it, a move that is likely to spur spending in the Southeast Asian nation but put pressure on its fiscal position, Reuters reported. It was during the last political regime in the country that GST was implemented in the year 2015 amid lower oil prices. The new Prime Minister Mahathir Mohamad had promised in his election campaign to get rid of the 6 percent GST so as to address the rising cost of living.

Malaysia follows a single GST rate of 6 percent for all goods and services unlike India with five different rates – 0 percent, 5 per cent, 12 percent, 18 per cent and 28 percent. A single GST rate means that all goods and services are taxed at a same rate.

In a statement released by Malaysia’s Finance Ministry on Wednesday, GST would become zero-rated tax from 1 June, Reuters reported. The removal of GST would make Malaysia credit negative as it would bring down bulk of revenues for the government and widen country’s fiscal deficit, ratings agency Moody’s said.

About 43.8 billion ringgit ($11.05 billion) were planned to be collected in 2018 in GST by the last government which amounts to about 18 percent of the total revenue of the government. Malaysia would be able to reduce the fiscal deficit by controlling expenditure in the absence of GST, Reuters reported citing Zeti Akhthar Aziz, a senior adviser to the Malaysian government. The government may reduce wastage in the public sector and re-look its priorities, Reuters reported citing him.

GST in India

The GST revenue collection for April has topped Rs 1 lakh crore, in a first since the implementation of the indirect tax in July 2017.