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Federal Government Cannot Prevent State Govt Absrob GST - Chua

[ 05-06-2015 ]
Federal Government Cannot Prevent State Govt Absrob GST - Chua
JOHOR BAHARU, June 4 (Bernama) -- The Federal government cannot prevent state governments from absorbing the Goods and Services Tax (GST) for government services but such action should be looked into properly as some services include business-related services.

Deputy Finance Minister II Datuk Chua Tee Yong said since it was state government revenue, they have the right to decide what they want to do with the revenue.

"We (Federal Government) have advised that they (state governments) should look into it properly as some of it are business-related activities like business licensing, paying for billboards and others.

"All these are revenue to the people, revenue to the state government, so do they pay GST on behalf of the commercial activities...how do they separate it?

"These are the things that requires detail and some time for implementation," he told reporters after officiating SME Bank Group Outreach and Biz Talk 2015 here today.

Chua was responding to a question on whether state governments were allowed to absorb GST for their government services.

Since the GST implementation on April 1, some state governments including Johor, Penang and Terengganu have expressed their willingness to absorb the tax imposed on government services.

Chua said the Finance Ministry was still waiting to finalise details from the state government on how they are going to go about it. The details are expected to be submitted to the Customs Department.

"I think it (GST) should continue first for a certain period before further adjustments are made because it will create further uncertainty by having adjustments on an adhoc basis.

"Because some of these activities relate to commercial, does this mean state governments want to include commercial as part of it? That means they are also subsidising businesses. Do people support this? We are not very sure," Chua said.

Meanwhile, Chua said the government still received proposals from either non-governmental organisations (NGOs), as well as, business associations to better improve the GST implementation.

"This requires step by step approach. Any drastic change during this period can create further confusion because at this moment, our list is the longest in terms of zero rating exemption," he said.

He said the government's key priorities are to minimise disruption to businesses, confusion to consumers, as well as, minimise tax input fraud.