Malaysia's fiscal stability will be jeopardised if SST expansion deferred, says PM

The Star

4 days ago

KUALA LUMPUR: The nation's fiscal stability would be jeopardised if the proposed expansion of the Sales and Service Tax (SST) were deferred, said Datuk Seri Anwar Ibrahim.
The Prime Minister stated that such a move would result in the government missing its revenue target and impact its ability to fulfil its responsibilities towards the rakyat.
"The revision of the sales tax rate and the expansion of the SST scope, which took effect on July 1, is expected to generate additional revenue of RM5bil over the six months of this year 2025 and RM10bil in 2026," he said in a written parliamentary reply to a question raised by Lim Guan Eng (PN-Bagan) in Dewan Rakyat on Thursday (July 24).
Lim had asked whether the SST expansion could be deferred in light of the United States tariffs and the current economic slowdown.
Anwar, who is also the Finance Minister, reaffirmed the government's commitment to strengthening the nation's fiscal position through tax reforms.
He emphasised that this was crucial in ensuring sustainable revenue to support development and social programs, despite growing public concern over the rising cost of living.
He noted several measures implemented to cushion the impact of the SST on the rakyat and businesses.
Among them, he cited the RM13bil allocation for STR/SARA cash aid programs, up from RM10bil compared to 2024.
He also mentioned the increased allocation for the Education Ministry, from RM59bil last year to RM64bil in 2025.
He added that the allocation for the Health Ministry was increased from RM41bil to RM45bil, which would aid in hiring contract doctors.
Service tax exemptions will be granted to tenants classified as small and medium enterprises (MSMEs) with annual sales of less than RM1mil.
For construction service providers, the threshold for service tax compliance has been increased from RM500,000 to RM1.5mil over 12 months, to ease the compliance burden on smaller contractors.
This same threshold applies to small-scale private healthcare clinics to protect them from undue tax pressure.
Regarding the breakdown of the additional tax revenue, particularly those borne by locals and foreigners as requested by Lim, Anwar said this was not possible.
He explained that it was not feasible to accurately determine such a breakdown because the national revenue collection system does not categorise contributions based on the taxpayer's citizenship.