View revised SST in broader fiscal context, tax expert tells M'sians
Basic necessities will continue to be exempted from sales tax, but a 5-10% rate will be imposed on non-essential items.
KUALA LUMPUR : The revision of sales tax rates and the expansion of the service tax scope form part of targeted fiscal measures to keep the nation's finances on a sustainable path, say tax experts.
PwC Malaysia tax leader Steve Chia said the review of the sales and service tax (SST) was expected, having been announced in the 2025 budget last October, and urged the public to view it in a broader fiscal context.
'While it is aimed at supporting the medium-term fiscal goals, a search for a longer-term solution remains necessary to ensure sustainable revenue contributions for the country.
'Although the current expansion is relatively broader, the government is committed to containing the scope to selected and non-essential goods and business-to-business (B2B) services to ensure the rakyat will not be burdened,' he told Bernama.
Finance minister II Amir Hamzah Azizan had announced that the government would implement the revised SST from July 1 to strengthen the country's fiscal position and improve support for public welfare.
Chia said a key challenge would be ensuring cascading costs are either eliminated or not passed along the value chain.
'Since the budget was announced, the government has made efforts to engage the relevant stakeholders, including industry associations and tax professionals, to ensure the revisions are well-informed and the impact on industries are taken into consideration.
'Therefore, the change is aimed at strengthening Malaysia's fiscal position by increasing revenue and broadening the tax base.
'We can see that the government is careful in identifying areas for rate increases and scope expansion to protect and cushion the impact on the rakyat at large.'
KPMG Malaysia's head of tax Soh Lian Seng however said the current SST framework is often viewed as less comprehensive than the previous goods and services tax (GST) scheme.
'This revision appears to be an effort to make the tax structure more progressive, broadening the base while ensuring the burden does not disproportionately fall on the rakyat.
'Expanding the scope of taxable services and revising rates can help improve revenue collection, which is essential for Malaysia's medium-term fiscal consolidation,' he said.
Soh said the government is likely aiming to enhance fairness and efficiency in tax collection by refining the scope and structure of the SST.
Soh said there may be a short-term spike in consumer spending as people rush to make purchases before the new rates take effect, similar to what was observed in 2015 ahead of the GST's implementation.
'However, this is likely to normalise within the next few months. In regard to concerns about inflation, the impact should be modest.
'While there are exemptions and reliefs in place to cushion the impact, the net effect should still contribute positively to government coffers, supporting broader fiscal sustainability,' he added.
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