GST elements in SST framework can address overlapping taxes, cost pressures: FMM

FMM In The News: SCOOP, August 18, 2026

KUALA LUMPUR — Incorporating selected elements of the Goods and Services Tax (GST) into the existing Sales and Service Tax (SST) framework could help resolve issues such as overlapping taxes and rising production costs, according to the Federation of Malaysian Manufacturers (FMM).

FMM president Jacob Lee Chor Kok said a well-designed credit mechanism could address these challenges at the source by allowing businesses to reclaim eligible taxes paid on inputs, instead of relying on repeated exemptions and corrective measures after implementation, Bernama reported.

“Therefore, FMM sees merit in the government’s proposal to incorporate the good elements of GST into SST, especially the input tax credit mechanism,” he said in a statement today.

FMM also proposed that the government introduce a tax credit or input tax offset mechanism for eligible sales and service taxes involving materials, machinery, logistics, factory rentals, construction and other relevant business services.

The move, it said, would prevent such taxes from becoming a permanent component of production costs.

The manufacturers’ group further suggested replacing various categories of exemptions and reliefs with a more systematic credit or rebate mechanism to reduce the impact of multiple taxation throughout the supply chain.

At the same time, FMM called for the establishment of a reliable, automated and timely refund mechanism, particularly to ensure accurate repayment of excess tax credits for exporters and capital-intensive manufacturers.

It added that essential goods should be protected from tax-driven price increases through zero-rating mechanisms similar to GST, or through equivalent credits, rebates or refunds.

FMM also stressed that eligible sales and service taxes incurred in the production and delivery of exported goods should be made creditable, refundable or eligible for rebates to ensure Malaysian exports do not bear domestic tax burdens and remain competitive internationally.

The group said existing e-Invoicing infrastructure should be leveraged to support verification processes, enhance transaction transparency and prevent fraudulent activities.

FMM also highlighted the importance of involving industry associations and relevant stakeholders from the early stages of policy review, design, implementation and transition to ensure the framework remains effective across sectors.

“We (FMM) welcome the government’s intention to retain SST as the basis of the system (tax) at present. If this approach is maintained, the priority should be to incorporate GST elements that can prevent taxes on business inputs from accumulating throughout the supply chain.

“This particularly includes input tax credits, effective tax treatment for essential goods and exports, as well as a refund mechanism that can be relied upon,” Lee said.

On Aug 18, Prime Minister Datuk Seri Anwar Ibrahim said the government was open to studying a proposal to combine elements of GST with SST to create a more progressive national taxation system.

However, Anwar, who is also Finance Minister, said Malaysia would retain SST as the country’s taxation system and that the government had no plans to impose a broad-based tax at this stage. – August 19, 2026

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