FMM backs integrating GST features in SST to curb cascading taxes

FMM president Jacob Lee said this would offer a way to tackle cascading taxes without requiring an immediate full return of the GST.

Lee said cascading taxes, where sales tax is imposed on a product at each successive stage in the supply chain, was an inherent weakness of SST.

He said taxes paid on business inputs generally could not be recovered, causing them to become embedded in production and distribution costs throughout the supply chain.

“The government’s proposal, therefore, opens a practical pathway to incorporate this important GST feature into SST,” he said in a statement.

Lee said the issue of cascading taxes had become more pressing following the expansion of SST since March 2024, when service tax on most taxable services rose from 6% to 8%, while that for logistics remained at 6%.

He said subsequent exemptions, rate reductions and transitional relief by Putrajaya showed the wider cost impact required further adjustment after implementation.

From July 2025, service tax was expanded to other areas, including rental and leasing, construction and financial services.

Yesterday, Prime Minister Anwar Ibrahim said the government was open to studying a system that would integrate elements of the GST and SST to create a more progressive tax structure.

The GST, a multi-stage consumption tax, was introduced in April 2015 at 6% before being zero-rated in June 2018 and replaced with the SST in September 2018.Lee proposed a GST-style input tax credit or offset mechanism covering eligible taxes on materials, machinery, logistics, factory rental, construction and financing.

He wanted eligible upstream taxes on essential goods and exports to be credited, rebated or refunded.

He also called for an automatic and time-bound refund mechanism, supported by Malaysia’s e-Invoice system.

FMM maintained that GST remained its preferred long-term framework, but called for immediate industry engagement if SST was to remain the base system.

Source: https://www.freemalaysiatoday.com/category/nation/2026/08/19/fmm-backs-integrating-gst-features-in-sst-to-curb-cascading-taxes