What does Malaysia scrapping its GST mean for Singapore stocks?

SINGAPORE (May 25): Malaysia’s decision to zero-rate the Goods and Services Tax from June 1 is widely expected to provide a small boost to consumer sentiment. Last year, GST revenue was RM44.3 billion ($15 billion) — equal to 3.3% of Malaysia’s GDP.

The government is expected to bring back a Sales and Services Tax, which was abolished to make way for the unpopular GST. But the SST generated less revenue — equal to 1.6% of GDP before it was replaced.

However, DBS senior economist Irvin Seah cautions that consumers may not necessarily frontload their expenditure in response to a permanent tax cut. And there may be some negative spill-over from the government’s efforts to reduce spending in order to make up for the shortfall in GST revenue.

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