Malaysia will be scrapping its Goods and Services Tax (GST) entirely on June 1, 2018.

This will fulfil a promise made by the Pakatan Harapan (PH) alliance led by newly-minted Prime Minister Mahathir Mohamad during the election campaign.

The finance ministry said in a statement released on Wednesday, May 16, that the GST removal is applicable throughout the country until further notice, and that all registered traders and businesses will have to comply with the zero GST rate.

However, the country will have to first repeal GST Act 2014 and then pass a new law on the Sales and Service Tax (SST) in parliament.

GST removal good for popularity

According to The Star, the GST rate of 6 percent was implemented on April 1, 2015, as part of former prime minister Najib Razak's efforts to widen the country's tax base.

However, while the GST removal is good for the new government's popularity, experts say that it might be disastrous for the economy.

According to Francis Hutchinson, coordinator of the Malaysian programme at the ISEAS-Yusof Ishak Institute, the GST removal will have a "significant fiscal impact that can affect Malaysia's risk ratings".

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