KUCHING: The government’s move to expand the Sales and Service Tax (SST) to boost revenue amid global economic uncertainty could strain small and medium-sized enterprises (SMEs) and increase pressure on consumer prices.
Sarawak Business Federation’s Secretary-General, Datuk Jonathan Chai Voon Tok, said while he acknowledged the need to strengthen the country’s fiscal position, the timing and scope of the SST expansion were concerning.
“This is especially in light of economic headwinds and uncertainties such as the US tariff policies.
“The service tax on rental and leasing would result in higher operating costs for many businesses given a threshold of exemption from paying service tax for Micro, Small and Medium Enterprises (MSMEs) with annual sales below RM500,000.
“We echo and support the proposal of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) that a review be carried out of the SST exemption threshold.
“It should be raised to RM2 million to relieve micro and small businesses.” he said to Sarawak Tribune.
Chai noted that the expansion of SST to include construction services was tempered by exemptions for residential buildings and public housing-related works, which he described as a welcome relief.
However, he cautioned that the broader SST implementation was likely to dampen demand for non-essential goods and selected services.
“The expansion of SST is likely to dampen the demand for selective non-essential goods and certain taxed services as upward adjustment of prices for such goods and services is expected,” he said.
Starting July 1, Malaysia will implement an expanded SST, with a 5 to 10 per cent sales tax on selected non-essential goods.
Essential goods like rice, fresh produce and medicines remain tax-exempted.
The service tax will now include more sectors such as leasing, logistics and private healthcare.
The move, announced in Budget 2025, aims to boost government revenue without burdening the public.
