Business groups urge delay of SST expansion, warn 8pc rental tax from July 1 could derail Malaysia's recovery

Malay Mail

6 hours ago

KUALA LUMPUR, June 16 – Six major business associations have jointly called on the government to defer the upcoming expansion of the Sales and Service Tax (SST), warning that the move could severely harm Malaysia's economic recovery.
In a joint statement, the groups warned that the imposition of 8 per cent SST on commercial rental and leasing services from July 1 could exacerbate inflation, hinder investments, and weaken consumer confidence.
'We recognise the need for fiscal consolidation, but the timing, scope and magnitude of this tax measure are gravely misguided,' the groups said in a statement here.
The statement was jointly released by the SME Association of Malaysia, Malaysia Retail Chain Association, Malaysia Retailers Association, Bumiputra Retailers Organisation Malaysia, Malaysia Shopping Malls Association, and the Federation of Malaysia Business Associations.
They said businesses are already under immense cost pressure from recent policies, including the hike in minimum wage, rationalisation of fuel and utility subsidies, and mandatory e-Invoicing — amid broader economic challenges like the weak ringgit and global trade uncertainty.
'Our members from sectors such as retail, logistics, manufacturing, and healthcare are struggling to cope with rising costs,' they said.
The associations warned that the SST expansion would increase operating expenses for small and medium enterprises (SMEs) that lease premises, and these costs would likely be passed on to consumers, fuelling inflation and shrinking purchasing power.
They said unlike the Goods and Services Tax (GST), the current SST regime does not allow input tax credits, causing tax cascading and double cost exposure along the supply chain, which they said is particularly harmful for SMEs operating on slim profit margins.
'We are not against tax reform, but it must be implemented with empathy and realism,' they said, adding that a more consultative and inclusive approach is needed.
The six groups presented five demands to the government: deferment of the SST expansion, reduction of the SST rate on rentals, exemptions for micro and small businesses, targeted relief for key sectors, and structured consultation with the business community.
They stressed that while businesses support fiscal responsibility, it should not come at the cost of economic stability or the survival of small enterprises.
On Sunday, Prime Minister Datuk Seri Anwar Ibrahim said the government is retaining the SST, which is more targeted in nature, particularly on imported luxury items such as avocados and cod, products typically consumed by high-income earners.