The heavily criticised Goods and Services Tax Bill 2009 was tabled today for first reading in the Dewan Rakyat.

The second and third reading will be done when Parliament convenes for its new session, scheduled to begin in March next year.

The government intends to implement the GST in the middle of 2011, giving ample time for all parties to prepare for its implementation.

ahmad husni hanadzlah Second Finance Minister Ahmad Husni Mohamed Hanadzlah said last month that the GST has been set at 4 percent - lower than the current sales tax and services tax (SST) rates.

Under the proposal, certain essential goods will be exempted from GST in order to avoid burdening the people, especially those who are poor and in the lower-income group.

The items include agricultural products (padi, vegetables), basic food (rice, sugar, flour, cooking oil), and fish, meat and chicken.

However, the opposition has criticised the GST as ‘punishing the poor’ as everyone will have to pay an additional tax on all goods and services. There is also the fear that the tax will be increased in the coming years.

At a press conference in the Parliament lobby, Ahmad Husni dismissed the suggestion that the government's move will lead to inflation as the government has carried out a "very comprehensive study" from various aspects.

"We looked at the tax burden, which is 4 percent under the GST… at the same time, we did a study based on the position in terms of region, where we found it is much lower compared to (previous) SST and (we did) a study based on the household expenditure.

"We found that there will be lots of savings as GST will be lower than the system of SST...The overall savings will range between RM14.52 to RM346.92 per year.”

Savings in other sectors

There will also be savings for those in the commercial and export sectors, as well, while tourism will get a boost, said Ahmad Husni.

The business sector can expect RM4 billion in savings because it will no longer have to pay tax on some professional services. Exporters, meanwhile, will save RM1.4 billion.

“We will benefit more from the GST, which is a modern tax system (that is) more efficient, more transparent," said Ahmad Husni.

He reiterated that its implementation will work out to be a win-win situation for both consumers and the business sector.

Despite the savings for both consumers and businesses, the government expects an additional RM1 billion revenue annually after the first year of its introduction.

The current sales tax is projected to raise RM7.8 billion in 2010 out of a total RM148 billion in revenues, according to government data.

The tax is aimed at reducing the government's dependence on revenues from state oil giant Petronas which accounts for over 40 percent of revenue.

The country's budget deficit will hit 7.4 percent of gross domestic product this year, with the government also pledging to bring down the deficit to 5.6 percent of GDP in 2010 by reducing subsidy bills for fuel and goods.

Malaysia currently has just 2.3 million people and companies paying income tax out of a population of 28 million.