Call to review SST for SMEs

The Star

15 hours ago

PETALING JAYA: The revision of the Sales and Services Tax (SST) thresholds for rental and leasing services represents a step forward, but industry experts argue that without accompanying structural reforms, Malaysian small businesses will continue to struggle in the challenging economic climate.
SME Association of Malaysia president Dr Chin Chee Seong said that more should be done to address challenges faced by small businesses.
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'The current revision to the SST threshold, while helpful to a small segment, does not fully address the systemic pressures MSMEs face,' he said.
Chin pointed out that among the additional support to small businesses are tax policy recalibration, reintroduction of input tax credit or tax offset mechanism and stronger digitalisation and compliance support.
He explained that recalibrating tax policy based on tenant size would shield MSMEs from burdensome tax costs, particularly in high-rent urban areas.
'The vast majority of landlords in urban centres including commercial building owners, mall operators and property investment companies easily exceed the RM1mil threshold.
'As such, most MSMEs renting from these landlords will still be charged the 8% service tax, resulting in an unavoidable increase in their operational costs,' he said, suggesting the threshold should be set at RM2mil or higher.
On Friday, the Finance Ministry announced revisions on the expanded SST which is due to begin on July 1.
Among others, the annual sales threshold for mandatory Service Tax registration has been raised from RM500,000 to RM1mil for leasing, rental, and financial services.
Chin also urged the government to consider the reinstatement of a more structured tax framework, citing Goods and Services Tax (GST), or a hybrid model that could reduce double taxation.
'Many MSMEs lack digital tools or accounting systems to manage SST compliance and the incoming e-invoicing mandate.
'Expand access to subsidised point-of-sales systems, accounting software, and e-invoicing tools under programmes like MSME Digital Grant or Penjana,' he said when explaining about the need for digital transformation for MSMEs.
'If the government is serious about enabling MSMEs, the backbone of Malaysia's economy, to remain competitive and resilient, it must go beyond symbolic tax threshold adjustments.
'What is required is structural reform, practical support, and policy empathy that takes into account the fragile business environment, rising operating costs, and the need for long-term sustainability,' added Chin.
Federation of Malaysian Business Associations vice-chairman Nivas Ragavan agreed with the need for a higher threshold.
While the RM1mil threshold was positive and meaningful for MSMEs, he cited factors such as high operational costs in the urban areas.
As such, he said there should be a further increase to RM1.5mil or introduce a tiered threshold according to sectors.
This was to provide more room for MSMEs to scale before being burdened with tax obligations, he said.
Nevertheless, Nivas agreed that the revision would allow the sector to keep prices more affordable for consumers.
'It would also allow MSMEs to retain margins or reinvest in business development and reduce administrative distractions so they can focus on their core business,' he said.
As part of further support to small businesses, Nivas suggested that there should be a simplified taxation system for MSMEs, like introducing presumptive tax systems.