Any move to reinstate the goods and services tax (GST) would impose a new financial burden on low-income households that currently do not pay income tax and would also drive up inflation, warned Rafizi Ramli.
The former economy minister said households whose incomes fall below the taxable threshold and therefore do not pay income tax would, under a GST regime, “pay tax for the first time.”
“GST is a regressive tax because, ultimately, it is ordinary people who bear the cost,” he said on the latest episode of the Yang Berhenti Menteri podcast.
Rafizi, the Pandan MP, noted that under the present sales and service tax (SST), many low-income households are protected because certain items are exempt. The government has previously stated that basic necessities will remain exempt under the SST.
“But if GST is implemented, daily essentials would be taxed. That could add RM1,000 to RM2,000 a year in new expenses for families who have never paid income tax before,” he said.
He also cautioned that the introduction of GST tends to cause an immediate rise in prices, similar to the effect seen when GST was introduced in 2015. “Whenever GST is implemented, you will see a jump in prices; if GST is 6%, prices typically rise by six to seven percent. In Malaysia, once prices increase, they seldom return to prior levels.”
Rafizi said the government’s current priority should be to keep inflation near 2% while pursuing wage reforms, before revisiting the possibility of GST. As reported, inflation stood at 1.1% year-on-year in June 2025.
“This is not about politics. It is about maintaining price stability and allowing sufficient runway for wages to grow faster than inflation,” he added.
In 2023, Rafizi said that although GST is an effective instrument for combating tax evasion, its reintroduction would place an additional financial burden on low-income households.
Last month, Finance Minister II Amir Hamzah Azizan said the government had ruled out reintroducing GST for the time being, calling it “impractical” under current economic conditions. He acknowledged the merits of the GST system but said it was “not suitable for now.”
In June, Prime Minister Anwar Ibrahim stated that Putrajaya would consider reintroducing GST only after economic conditions improved and the minimum wage reached RM4,000 or higher.
