Local fruits not subject to sales tax, nor impacted by gazette order
(Editor's note: This article has been updated after receiving clarification from the Finance Ministry.)
The Finance Ministry has cleared up confusion over perceived discrepancies regarding the implementation of the sales and services tax (SST) on fruits, be they locally grown or imported.
The gazetted sales tax order published on Monday showed that many fruits grown locally were listed to be taxed five percent, while the tax-exempt list only listed coconut...
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The Star
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- The Star
KPJ Healthcare likely to face challenges
PETALING JAYA: KPJ Healthcare Bhd is likely to face a tougher business environment from July 2025, as the expanded sales and service tax (SST) is expected to raise its rental and medical tourism costs. In a note to clients, MIDF Research highlighted that KPJ had injected two hospital properties – a 15-storey building at KPJ Ampang Puteri and a 10-storey building at KPJ Penang – into Al-'Aqar Healthcare REIT for a total of RM241mil. Under the agreement, KPJ would lease KPJ Ampang Puteri for 11 years and KPJ Penang for 15 years, with an annual rental increment of 2% and the option to extend the lease for another 15 years. The brokerage pointed out: 'The rental for these two assets will be charged at approximately RM15mil in 2025 as a baseline. With the implemented SST, we opine the net charge would be about RM16mil. 'However, it should be noted that any contracts signed before the date of implementation will be exempted from SST for a year. Hence, 2026 rental is estimated to be nearly RM17mil. By 2040, we expect the rental for these two assets to reach about RM22mil,' it added. MIDF Research also noted that KPJ had previously injected 19 out of its 30 hospitals into Al-'Aqar, with the 2024 lease, excluding the two newly injected assets, amounting to over RM107mil. The RM100mil debt repayments would mitigate additional costs from the sale-and-leasebacks, while the additional working capital of RM139mil would support operational improvements. 'We believe the short-term support will streamline KPJ's financial performance amid the economic headwinds and policy changes,' it said. On medical tourism, MIDF Research estimated that SST would add RM24mil to RM32mil per annum in tax expenses, given that around 9% to 12% of KPJ's revenue stemmed from this segment. 'We noted that this could increase the cost of treatment, subsequently reduce KPJ's competitiveness with other domestic and regional players and increase price sensitivity,' it explained. The research house revised its earnings forecast for 2025-2027 downwards by 1%, adjusting its target price to RM3 from RM3.02, pegging on a price-earnings ratio of 28.8 times to the revised estimated earnings per share of 10.4 sen. 'Considering that the impact of the SST is minimal on the group's forecast results, we maintain our 'neutral' call on KPJ,' it said.
The Star
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FBM KLCI set to remain range-bound
PETALING JAYA: As the world at large heaved a sigh of relief at the conclusion of the United States-China trade discussions in London on Tuesday, attention has turned back towards Malaysian equities, as investors wonder what is in store for the FBM KLCI. This is especially relevant given that Malaysia has yet to conclude its own trade talks with Washington as the former continues its effort to reduce the 24% hitherto provisional tariffs that were imposed on April 2 by US President Donald Trump. Most analysts, however, are of the view that at the very least, the conclusion of trade meetings between the United States and China have put paid to any foreseeable escalation of trade tensions between the two superpowers in the near term, and while cautious sentiments still surround the FBM KLCI, the benchmark index should perform better in the second half of financial year 2025 (2H25). Rakuten Trade head of equity sales and analyst Vincent Lau believes that the announcement from US Treasury Secretary Scott Bessent that the Trump administration may extend the 90-day tariff pause on some countries in order to continue trade negotiations, signals further goodwill. 'We feel things can only improve from here, and 2H25 could be stronger for the FBM KLCI following slightly underwhelming 1Q25 corporate results, especially if Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz can conclude a deal with the Trump administration promptly in next week's talks,' he told StarBiz. As such, Lau acknowledged investors could still adopt a wait-and-see approach over the next week, which has caused the FBM KLCI to lag behind other regional and global bourses, predicting that the index could trade between 1,520 and 1,550 points in the third week of June. He said this is because investors may still be concerned that Malaysia is largely an export-driven market, as businesses are also taking time to adjust to the impact of the expanded sales and services tax (SST) that will come into effect on July 1. On the other hand, he opined that with the European Central Bank having reduced rates by 25 basis points this month, and Bank Negara and the US Federal Reserve also considering a similar move within the next quarter, funds are ready to return to the market. Lau added that the SST broadening by the government is necessary, which would assure investors that the current administration is serious in improving its tax revenue. Of interest, Areca Capital chief executive Danny Wong commented that the US-China trade tension may not have been as bad as have been portrayed in the mainstream media in recent months, given this week's developments. 'If both sides willingly continue to resolve these tariff issues, we believe the FBM KLCI will recover significantly. Short-term outlook remains dependent on news, but we now see an upside bias. 'As suggested, developing markets including Asian bourses are expected to perform better in 2H25,' he told StarBiz. While also expecting a gradual recovery for the FBM KLCI in 2H25, Tradeview Capital chief investment officer Nixon Wong is predicting the index to trade 'neutral' range-bound, as investors take to the sidelines as they wait for conclusive trade talk updates between Putrajaya and the Trump administration. 'However, signals from China and the United States have been stable and less hostile for the time being. 'We should see gradual recovery in the last six months of 2025 as business sentiment may recover, and fund flows may be more risk-on after getting more details and clarity on the US trade policies after mid-July,' he said. Meanwhile, a head of research and analyst at a foreign brokerage firm is projecting for the premier index to trade within a narrow range of 1,510 to 1,530 for this week, reflecting cautious optimism from the Washington-Beijing trade truce, but tempered by uncertainty in the US-Malaysia talks. 'For next week ending June 20, the index could test 1,500 to 1,550, with potential upside toward 1,550 if trade talks progress favourably and domestic sectors such as banking and construction remain supportive. 'However, a bearish scenario could see the index drop below 1,500 if US-Malaysia trade talks falter or global trade tensions escalate,' she said. Elaborating, she said the US-China resolution in London provided some clarity, reducing immediate uncertainty about a potential escalation in the trade war, although the relatively high US tariff rate of 55% on China could disrupt global supply chains, particularly in Asia, where Malaysia is a key player in manufacturing and electronics exports. Beijing has tagged the United States with a 10% levy rate in return. The agreement's positive signal of a trade truce may boost global market sentiment, but the high tariffs could pressure Malaysian exporters reliant on the US or Chinese markets, especially in technology and semiconductors, she pointed out. The analyst explained, 'The market's reaction to the United States-China trade truce will likely solidify next week. 'If the framework is ratified by Trump and Xi, optimism could drive the FBM KLCI toward the 1,550 resistance level, especially if global equities rally. 'However, ongoing trade talks between Malaysia and the United States will remain a headwind. 'Any indication of punitive tariffs on Malaysian exports, such as electronics, which account for about 40% of Malaysia's exports, could pressure the index, particularly tech-heavy components like Inari Amertron Bhd and Nationgate Holdings Bhd .' On the flipside, positive domestic factors, such as foreign inflows and a stronger ringgit may offset some external pressures, supporting sectors like construction, property and renewable energy, she said. 'Technical forecasts suggest a potential rebound if the 1,600 support holds, with upside targets at 1,620 to 1,630. However, a break below 1,500 could signal a bearish trend toward 1,487, driven by trade war fears,' added the analyst. Taking a look at notable sectors, she said banking is expected to lead gains due to its strong earnings growth and domestic liquidity, while export-driven industries such as technology and commodities will be vulnerable to US tariff developments, although they could stabilise if trade talks progress favourably. 'Investors should focus on quality, dividend-paying stocks in resilient sectors like banking and construction, while monitoring export-driven sectors like technology for tariff-related risks,' she said.
The Star
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Reintroduce flat-rate GST in Sabah, urges accountants association
KOTA KINABALU: The government is being urged to consider reintroducing a simplified Goods and Services Tax (GST). This proposal arises from concerns that the upcoming expansion of the Sales and Services Tax (SST) could burden businesses and consumers, especially in Sabah. The Sabah Association of Professional Accountants (SAPA) suggested a flat-rate GST set at 3% to offer a fairer, more transparent, and efficient taxation model that could ease administrative burdens and reduce cost layering across industries. "We believe a modern GST system, with basic exemptions and simplicity, would better serve Malaysia's fiscal goals while protecting the vulnerable," stated SAPA president Datuk Tan Kok Liang on Thursday (June 12). SAPA expressed concern that the SST expansion, effective July 1, could disproportionately impact Sabah's fragile economy. The inclusion of construction services and commercial property leases under SST could lead to higher project and rental costs, particularly in rural and semi-urban areas. "In Sabah, infrastructure gaps and higher logistics costs already affect businesses. Adding tax pressure in areas like construction and shoplot rentals will further discourage investment and growth," said Tan. He noted that small and medium-sized enterprises (SMEs), considered the backbone of the state's economy, risk bearing the brunt of these changes, with higher costs likely passed down to tenants and consumers. Tan acknowledged positive elements in SST, welcoming exemptions such as residential property rentals, basic goods like rice and medicines, and the exclusion of private healthcare for Malaysian citizens. "These are thoughtful measures that protect lower- and middle-income groups from unnecessary financial strain," said Tan, adding that such exemptions demonstrate the government's effort to balance revenue and social protection. The association argues GST offers advantages over SST, including input tax credits that avoid cascading costs, better audit trails, and stronger alignment with international tax standards, crucial for boosting investor confidence. Tan said a simplified GST system could be tailored to Malaysia's needs and implemented without affecting essential goods and services. "A well-designed GST would be more equitable and sustainable in the long term, likely less burdensome to consumers than the current dual-rate SST," he said. SAPA also raised concerns about mandatory e-invoicing, noting many businesses, NGOs, and religious institutions in Sabah may lack the technical capacity or infrastructure to comply. Tan mentioned that a reintroduced GST would incorporate invoice tracking, making a parallel e-invoicing system redundant for compliance purposes. The group urged policymakers to adopt a more inclusive and consultative approach in tax reform discussions, especially considering regional disparities between Peninsular Malaysia and East Malaysia. "We are ready to work with the government through technical consultations to ensure Sabah's unique economic circumstances are properly represented," Tan said.
