.jpg)
CONSUMER associations and business bodies are urging the Malaysian government to postpone and reconsider the revised and expanded Sales and Service Tax (SST), slated for enforcement from 1 July 2025, warning it may intensify living cost pressures and jeopardise the financial health of small and medium-sized enterprises (SMEs) across the country.
The SST overhaul, introduced under Budget 2025, is drawing criticism from stakeholders who argue that it risks regressive outcomes, disproportionately affecting low and middle-income earners and exposing SMEs to compliance burdens and cost escalation in a fragile economic climate.
The Star reported today that the Federation of Malaysian Consumers Associations (Fomca) has voiced serious concern that the 5 per cent sales tax on daily necessities such as cooking oil, fruit and cereal would weigh heavily on B40 and M40 households, who already spend a substantial share of their income on essential items.
“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,” said Fomca’s chief executive officer Saravanan Thambirajah.
He warned that the expanded tax base, especially when applied to raw materials and intermediary goods, could trigger a chain reaction of price increases throughout the supply chain.
The impact, he noted, would be particularly acute in rural and semi-urban communities, where consumers have limited alternatives.
“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, also calling for simpler tax classifications, clearer consumer guidance and stricter enforcement by the Ministry of Domestic Trade and Cost of Living.
Echoing these sentiments, the Small and Medium Enterprises Association Malaysia warned that the revised SST could place substantial strain on businesses already contending with inflationary costs and subdued consumer demand.
Its president, Datuk William Ng, called for the SST registration threshold to be raised from RM500,000 to RM2 million, or for micro and small firms to be exempt altogether.
“Without timely clarification, many SMEs may fall into accidental non-compliance despite the enforcement grace period until the end of 2025,” he told The Star. “A higher exemption threshold would be a more prudent move under current economic uncertainty.”
He noted that including rental and business-to-business services within the expanded SST net would likely increase overheads and, in turn, lead to higher prices for end consumers.
Private healthcare providers have also expressed concern. The Association of Private Hospitals Malaysia (APHM) is seeking a delay in the implementation of the 6 per cent service tax on medical services provided to non-Malaysians.
Its president, Datuk Dr Kuljit Singh, argued that the sector needs more time to adapt to the changes and ensure compliance.
“This could be passed on through higher hospital bills,” The star cited him saying. Although the tax may have a short-term impact on medical tourism, he added, the longer-term effects are expected to be marginal. Nonetheless, he stressed that administrative and operational costs would inevitably rise.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) warned of broader economic risks, with its president, Datuk Ng Yih Pyng, cautioning that implementing tax reforms amid global economic instability and fluctuating US trade policy could exacerbate financial pressures on SMEs and consumers alike.
As part of the revised SST, key changes are due to take effect from July. Under the sales tax regime, exempted items will include fresh meat and seafood such as chicken, fish and prawns, local fruits and vegetables, basic grains such as rice, barley and wheat, as well as cooking oil, white bread, milk, canned sardines, sugar and salt.
Items remaining under the 5 per cent bracket include cheese, fruit jams, abalone, lobster, quinoa and smartphones. Products that will be moved into the 5 per cent bracket include king crab, salmon, cod, truffles, imported strawberries, essential oils, silk fabric and industrial machinery.
Goods remaining at 10 per cent include caviar, shark fins, alcohol, tobacco and leather items, while racing bicycles, tungsten scrap and antique paintings will now attract the higher 10 per cent rate.
The scope of the service tax will also expand significantly.
Rental and leasing services will be taxed at 8 per cent, with exemptions for residential housing, reading materials and tangible assets outside Malaysia. Business-to-business transactions will not be taxed.
Construction services related to infrastructure and commercial or industrial buildings will face a 6 per cent tax, while residential construction is excluded.
Financial services will attract an 8 per cent levy on fees and commissions, with exemptions granted for Shariah-compliant profits, foreign exchange and basic banking services.
Healthcare services provided to non-Malaysian citizens will be taxed at 6 per cent, while Malaysian citizens remain exempt.
Private education providers must register if they charge over RM60,000 in tuition fees per student annually, with a 6 per cent tax applied to such services for foreign students. Public education and services provided to Malaysians are exempt.
Beauty services, including hairdressing, facials, body treatments and tattooing, will be subject to an 8 per cent tax.
The Ministry of Finance has defended the revised SST, stating it is necessary to broaden the tax base and enhance Malaysia’s fiscal strength, while asserting that the measures are designed not to overburden the public.
However, with opposition building from both civil society and the private sector, the government is under increasing pressure to revisit the plan to ensure it does not erode economic stability or public trust. - June 12, 2025
.jpg)
