KUALA LUMPUR, Aug. 18, 2026 — Malaysia is once again weighing changes to its consumption-tax system, with Prime Minister Anwar Ibrahim signaling that elements of the country’s former Goods and Services Tax (GST) could potentially form part of a new approach.
But despite the renewed discussion, Malaysia has not announced a return of GST, and no new GST rate or implementation date has been set.
Anwar, who is also finance minister, said Tuesday that the government is studying ways to create a tax system that is more progressive and efficient, while protecting lower-income Malaysians from a heavier financial burden.
“We need to see how we can combine these two systems to find a new way to determine a more progressive and efficient taxation system,” Anwar said at a Finance Ministry event, according to CNA.
GST may return — but not necessarily in its old form
Malaysia introduced GST at 6% in 2015, but the tax was abolished in 2018 following strong public opposition, particularly amid concerns over the rising cost of living. It was replaced by the current Sales and Services Tax (SST) system.
Anwar acknowledged that GST has advantages, describing it as a transparent and efficient method of tax collection. However, he also stressed the need to consider its impact on poorer households.
That distinction is important: the government’s current discussion is about reforming consumption taxation, not simply bringing back the old 6% GST.
Why is the government looking at the system again?
Malaysia has been pursuing a broader fiscal-reform agenda aimed at increasing government revenue, improving the efficiency of taxation and reducing its reliance on certain revenue sources.
The government has already expanded the SST framework. From July 2025, Malaysia introduced revised sales-tax rates of 5% to 10% on selected non-essential and luxury goods, while expanding the services-tax coverage to additional sectors including property rental, construction, financial services, private healthcare, education and beauty services.
The reforms were designed to broaden the tax base while limiting the impact on essential goods and services.
But Anwar now says the existing SST system has weaknesses that the government cannot simply ignore.
The biggest challenge: protecting ordinary Malaysians
The political and economic dilemma is clear.
A broad-based consumption tax can potentially provide the government with a more predictable and comprehensive source of revenue. But because consumption taxes can affect consumers across income groups, policymakers have to ensure that lower-income households are not disproportionately hit.
That concern has been central to Anwar’s position on GST for years.
In 2023, shortly after becoming prime minister, Anwar said Malaysia had no plans to reintroduce GST or another broad-based consumption tax, arguing that the government should instead focus on reducing subsidies benefiting wealthier groups.
As recently as December 2025, the government was still saying there were no immediate plans to implement GST, with officials citing relatively low household incomes and the lengthy preparation required for businesses to upgrade their systems.
July decision shows GST was not imminent
The latest development also comes only weeks after Anwar told Parliament that the government would retain the SST framework for the time being.
In July, The Star reported that GST had been ruled out for the immediate future partly because businesses could require up to two years of preparation to update their systems before a new GST regime could be implemented.
That means Tuesday’s announcement should not be interpreted as an immediate tax increase.
Instead, it appears to reopen a much bigger policy question: what should Malaysia’s long-term consumption-tax system look like?
Economists have been debating a GST comeback
The GST debate has not disappeared from Malaysia’s economic conversation.
In recent weeks, proposals have surfaced suggesting that Malaysia could eventually introduce GST at a lower rate than the previous 6%. The Star reported on Aug. 11 that one proposal suggested an initial GST rate of 4%, alongside other measures intended to broaden the government’s revenue base.
However, that is an analyst proposal — not a government announcement.
For now, Anwar has not committed the government to a specific GST rate or timetable.
What Malaysians should watch next
The next major test will be whether the government can design a system that raises sufficient revenue without intensifying pressure on households already facing higher living costs.
That could involve a redesigned consumption-tax model, changes to the existing SST, GST-style mechanisms, stronger exemptions for essential goods or targeted assistance for vulnerable households.
For businesses, another key issue will be implementation.
A return to a GST-type system would require companies to make changes to accounting, invoicing, pricing and tax-reporting systems — one reason officials have previously indicated that implementation could take a significant amount of time.
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