KUALA LUMPUR (AP) -- Malaysia's government plans to impose a 4 percent goods and services tax by 2011 to boost revenue by an additional RM1 billion annually, a senior official Thursday.

Second Finance Minister Ahmad Husni Hanadzlah said the new tax was crucial to the country's economic well-being and would replace the current narrowly applied 10 percent sales tax and 5 percent services tax.

The GST is a broad-based consumption tax levied on transactions at all stages of production of goods and services, while Malaysia's current sales and services taxes are single-stage taxes applicable to selected goods and services.

The change to its tax regime comes as the government seeks to cut its budget deficit, which is expected to surge to 7.4 percent of gross domestic product this year, as well as reduce reliance on income from state oil company Petronas which contributes 40 percent of its revenue.

"The revenue source must be sustainable. If we can get sustainable revenues, we can get a good budget," Ahmad Husni was quoted as saying by national Bernama news agency.

However, he said essential goods such as rice, sugar, cooking oil and flour as well as domestic transportation would be exempted from the GST to ensure it would not burden the poor.

The bill on the sales tax will be tabled in Parliament for its first reading next month and is expected to be passed by March and to be implemented 18 months after that, he said. An aide to Ahmad Husni confirmed his comments but couldn't give further details.

Malaysia and Hong Kong are two countries in the region that have for years put off plans to introduce a goods and services tax. Malaysia's government fears an electoral backlash while critics in Hong Kong say it may hurt the poor and scare tourists away.

Malaysian Prime Minister Najib Razak, who took power in April, has promised the government would introduce the GST "very gently" to ensure it would not burden the poor and middle-class or cause inflation to rise.