KUALA LUMPUR (Nov 4): More often than not, consumers do not think about the sales or service tax they indirectly incurred when purchasing goods from retail stores.

As the portion of the sales or service tax paid earlier on in the supply chain is not reflected in the receipt of the consumer’s purchase, it is invisible to the consumer, unless it is a service the consumer buys directly, such as having a meal at a restaurant — which attracts a 6% service tax.  

Being a final tax in nature, meaning that businesses do not get to claim a credit for incurring it, it creates a tax-on-tax effect along the supply chain, where the effect is especially apparent with service tax.

Tax experts call the cascading, or compounding effect, one of the biggest weaknesses of the current sales and service tax (SST) regime, while the lack of transparency is also seen as another downside to the current indirect tax regime Malaysia adopts.

At this juncture, the goods and services tax (GST) does not seem likely to take place for many reasons. Besides it being highly politicised, tax experts also believe that GST and the subsidy rationalisation efforts the government is embarking on cannot be implemented at the same time as it will result in higher inflation.

So what is the solution for this?

Read all about this in the Nov 6, 2023 issue of The Edge Malaysia weekly.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.