20 AUGUST 2026 – Malaysia’s business community supports efforts to improve the existing SST system, but urges the Government to eliminate tax cascading, simplify compliance and speed up input tax refunds.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) has welcomed the Government’s proposal to explore a hybrid Sales and Service Tax (SST)-Goods and Services Tax (GST) framework, while calling for measures that would support business growth and make tax compliance easier.
Under the proposed framework, SST would remain the country’s primary tax base, while selected GST features would be incorporated to create a more efficient system without bringing back a broad-based consumption tax.
ACCCIM said the approach could improve the existing SST framework, provided the Government carefully considers the impact on businesses, particularly small and medium enterprises (SMEs).
ACCCIM has long supported GST
ACCCIM has previously expressed strong support for the reintroduction of GST, which it said is widely recognised as a more structurally efficient and transparent multi-stage consumption tax compared with a single-stage SST.
A key advantage of GST is its input tax credit mechanism, which allows businesses to claim back tax paid on business purchases and raw materials. This helps eliminate the cascading effect of taxation, where tax can effectively be imposed on costs that already include tax.
According to ACCCIM, removing this cascading effect can help reduce business costs and strengthen the cost competitiveness of domestic industries.
However, the Government has maintained that household income thresholds remain too low for the reintroduction of GST, and has instead opted to refine the existing SST while exploring a more targeted hybrid SST-GST framework.
The Ministry of Finance is currently expected to conduct a comprehensive review of the proposal before preparing an official report for consideration by the Cabinet. ACCCIM noted that no fixed implementation timeline or final decision has been announced.
Comprehensive review needed before implementation
While ACCCIM welcomes efforts to improve Malaysia’s indirect tax framework, it stressed that GST and SST are fundamentally different systems, with significant differences in how they are structured, legislated and applied.
As a result, ACCCIM said the proposed hybrid framework would require a comprehensive review to ensure smooth implementation and avoid unnecessary uncertainty for businesses.
Particular attention should be given to accounting rules and legal definitions, especially to ensure that SMEs can clearly understand and comply with the requirements of the new system.
The chamber said greater clarity would be essential in preventing ambiguity and reducing the compliance burden on businesses.
Simplifying tax compliance and improving cash flow
ACCCIM also called for the proposed framework to prioritise ease of compliance and business cash flow.
Among its recommendations are reducing paperwork and documentation requirements, introducing automatic input tax claims with random audits conducted subsequently, and shortening the turnaround time for input tax refunds.
These measures, ACCCIM said, would help businesses manage their tax obligations more efficiently while reducing the administrative resources required to comply with the system.
For SMEs in particular, a simpler compliance process could help reduce the operational and financial burden associated with indirect taxation.
Balancing revenue with business growth
ACCCIM said the proposed hybrid SST-GST framework should ultimately strike a balance between business growth, tax compliance and Federal revenue needs.
At the same time, the system should avoid disproportionately affecting lower-income groups and small businesses.
The chamber reiterated that the effectiveness of any revised SST framework would depend not only on its tax structure, but also on how easily businesses can understand, administer and comply with it.
As the Government continues its review of the proposed hybrid SST-GST framework, ACCCIM said these considerations should remain central to the development of a tax system that supports Malaysia’s businesses while maintaining sustainable government revenue.
