2 days ago
‘Put revised SST on hold'
Stretching their ringgit: Consumers are increasingly turning to dry foods in view of rising costs, resulting in a noticeable drop in the sale of fresh food items, say industry players. — LOW LAY PHON/The Star
PETALING JAYA: Stakeholders want the government to review the expanded Sales and Service Tax (SST), warning that it could worsen living costs and place further strain on small businesses amid fragile economic conditions.
They said concerns have been raised over the SST's cascading nature, lack of clarity and potential to erode household spending while squeezing business margins.
The Federation of Malaysian Consumers Associations (Fomca) said the expanded SST, set to take effect on July 1, would disproportionately impact lower and middle-income groups.
Fomca chief executive officer Saravanan Thambirajah said B40 and M40 households, which already spend a large share of their income on essentials, would feel the brunt of a 5% tax on items like cooking oil, fruit and cereal.
'It's not just about paying more. It's about trade-offs families will have to make such as cutting back on nutrition or postponing medical and educational needs,' he said yesterday.
He added that the effect would be more severe in rural and semi-urban areas, where alternatives are limited.
Although some basic items remain exempt, Saravanan said the taxation of raw materials and intermediary goods will eventually push up retail prices, especially when combined with recent fuel subsidy rationalisation.
This could trigger a cost-push inflation cycle, he warned.
'To mitigate the impact, the government must expand targeted cash assistance such as Sumbangan Tunai Rahmah, consider zero-rating high-consumption items for B40 groups and strictly monitor prices to prevent profiteering,' he said.
Saravanan also called for clearer public guidance, simplified lists of taxable items, consumer-facing price watch tools and stronger enforcement by the Domestic Trade and Cost of Living Ministry.
Small and Medium Enterprises Association Malaysia warned that the SST rollout could significantly strain small and medium enterprises already burdened by high input costs and weak demand.
Its president Datuk William Ng called for the SST registration threshold to be raised from RM500,000 to RM2mil, or for micro and small enterprises to be exempt altogether.
He said the expanded SST now includes rent and business-to-business services, which could drive up operating costs and eventually consumer prices.
Ng also called for immediate sector-specific guidance from the Customs Department to help prevent unintentional non-compliance.
'Without timely clarification, many SMEs may fall into accidental non-compliance despite the enforcement grace period until the end of 2025,' he said.
He said a higher exemption threshold would be a more prudent move under current economic uncertainty.
The Association of Private Hospitals Malaysia (APHM) called for a delay on the expanded SST on private healthcare services.
APHM president Datuk Dr Kuljit Singh said more time is needed to ensure a smooth transition and full compliance, while also calling for clarity on how the tax will apply to professional fees and foreign patients residing in Malaysia.
While the 6% service tax on non-Malaysian patients may result in a short-term dip in medical tourism, he said the long-term impact is likely to be limited.
He warned that the expanded tax would increase administrative workload and operational costs, which could be passed on through higher hospital bills.
The Associated Chinese Chambers of Commerce and Industry of Malaysia highlighted broader macroeconomic risks.
Its president Datuk Ng Yih Pyng warned that expanding the SST amid ongoing global economic headwinds and uncertainty surrounding US tariff policies could strain SMEs and increase pressure on consumer prices.
'We urge that a review be carried out of the SST exemption threshold. It should be raised to RM2mil to relieve micro and small businesses,' he added.
