KUCHING: The government has been urged to consider reintroducing the Goods and Services Tax (GST), as industries including timber struggle with rising costs and mounting compliance burdens under the expanded Sales and Service Tax (SST) framework.
Sarawak Timber Association (STA) chief executive officer Annie Ting said the expansion of SST, which coincided with the rollout of Phase 3 e-invoicing, has left many businesses scrambling to comply with new requirements on short notice.
“While consumers may enjoy temporary relief, businesses are facing a permanent rise in operational complexity and cost,” she said in a statement yesterday.
Ting said that the inherent cascading tax effect of the SST where taxes are imposed at multiple points in the supply chain without input tax credits continues to raise the overall cost of doing business.
For the timber sector, this is particularly problematic following the reclassification of previously exempt items such as sawntimber and plywood, now taxed at 5 per cent or 10 per cent.
She added that the tax burden is compounded by complicated exemption mechanisms for raw materials, which manufacturers must navigate when producing both taxable and nontaxable goods.
“These industryspecific challenges highlight a disconnect between top-down fiscal policies and the day-to-day operational realities faced by businesses,” she said.
Ting also noted that many businesses remain confused about SST compliance, particularly in determining eligibility for exemptions.
“Under current rules, exemptions for input materials are available, but subject to preconditions that are often unclear.
For businesses handling both taxable and exempt products, segregating and tracking inputs becomes very challenging,” she said.
She called for greater engagement between businesses, tax professionals and government authorities to iron out ambiguities and prevent penalties from unintended non-compliance.
Ting urged policymakers to revisit the GST framework, which she argued offers a more efficient, transparent and equitable system.
Unlike SST, GST allows businesses to claim input tax credits, avoiding tax-on-tax effects and improving cost management across supply chains.
“SST is a narrow-based, singlestage tax applied at the point of manufacturing or importation and selected services.
Its limited coverage reduces revenue potential and introduces market distortions,” she said.
She pointed out that GST’s broader base and multi-stage mechanism where businesses remit only the net tax (output minus input) makes it more stable and efficient for revenue collection.
Ting said that most businesses are already familiar with GST systems and processes from its previous implementation between 2015 and 2018, and thus a reintroduction would not require the original 18-month preparation period.
To cushion the impact of inflation, she suggested that GST be reintroduced at a lower rate of 3 per cent instead of 6 per cent, with targeted subsidies — such as direct cash aid — for lowincome groups.
Essential items like basic groceries, healthcare and education could also be zerorated or exempted.
“While SST expansion may raise revenue in the short term, its structural flaws from cascading effects to compliance burdens limit its effectiveness.
A well-executed GST comeback, with public engagement and safeguards for vulnerable groups, offers a more sustainable path forward,” she said.
