SST revision, expansion to have minimal impact on construction, consumer segment
KUALA LUMPUR: The upcoming revision and expansion of Sales and Service Tax's (SST) scope is expected to have limited impact on the construction and consumer segments, according to Kenanga Investment Bank Bhd .
However, the exercise is likely to have an adverse impact on the Real Estate Investment Trust (REIT) sector, as well as financial services and private healthcare, it said in a note today.
It said the construction and consumer sectors were likely to be more insulated, noting that the changes to the SST were drafted with the welfare of the majority of Malaysians in mind, particularly in the case of the consumer segment.
It also welcomed the fact that the revised SST framework remained mindful of potential cascading effects along the business supply chain.
Meanwhile, Hong Leong Investment Bank Bhd believes that the expanded SST is a non-event for markets, as it is targeted in nature and deliberately structured to avoid essential goods and services.
"While sectors such as construction, banking, and healthcare may appear exposed, we expect any profit impact to be negligible," it said in a separate note.
It noted that in terms of construction services, most contract structures allow for cost pass-through mechanisms, and new project tenders are likely to be repriced, transferring the incremental cost to the end-customer.
For financial services, it does not expect any material impact on banks, as they primarily serve as tax collection agents on behalf of the government.
"Nevertheless, we believe demand for these services will stay fairly inelastic, given limited substitutability," it added. - Bernama
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