SST tweaks bring big relief for rakyat

New Straits Times

a day ago

KUALA LUMPUR: The government's move to fine-tune the Sales and Service Tax (SST) will not significantly affect its revenue collection but will have a positive impact on the people, said an economist.
Professor Emeritus Dr Barjoyai Bardai, provost at Malaysia University of Science and Technology, said the expanded SST was expected to boost tax collection to RM51.7 billion in 2025, up from the earlier forecast of RM46.7 billion.
"I don't see this (tax collection) being affected too much by the exemptions for the beauty sector, apples, oranges and dates, as well as the increased SST registration threshold from RM500,000 to RM1 million for leasing, rental and financial services.
"At most, I believe that it would be around RM1 billion to RM2 billion. However, the tweaks will be a big relief for those on the ground."
Barjoyai said the exemption for the entire beauty sector would help control inflation as personal care was a key expenditure for many people.
"In May, the inflation rate for personal care stood at 3.7 per cent, so this is the right move," he said, citing Statistics Department figures.
Barjoyai said the increase of the SST registration threshold to RM1 million would see many micro, small and medium enterprises exempt from paying the eight per cent tax on leasing, rental and financial services.
"This is especially important in rural and suburban areas, and for small shops in apartments and flats. Their sales will not reach RM1 million a year."
Still, he said, retailers in malls and those with many branches would likely be affected, though he did not believe they would immediately raise prices.
"The retail sector is price-sensitive, and competition is fierce. I think they will absorb the increase in costs in the short run and only pass on the costs in the longer run."
On the SST exemption for apples, oranges and dates, Barjoyai said this was appropriate as local fruits were not always cheaper than imported fruits.
"Mangoes, rambutans and durians, for example, can cost a lot more than apples and oranges.
"Overall, the tweaks are a good move, and it indicates that the government is listening to the people."
Economist Dr Geoffrey Williams said the SST adjustments would not significantly alter the government's overall tax collection.
"The SST will still be effective in improving government income to provide more money for priorities such as health, education and social protection."
He added that exempting imported fruits and beauty services would keep prices steady and prevent disruptions to consumer behaviour.
Consumers, however, must remain alert and ensure businesses did not take advantage of the situation by unjustifiably raising prices, he added.
"Overall, it is a signal that the government is making modest changes and taking stakeholder views into account.
"This is a positive approach to tax policy and should make implementation easier," he said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said he believed the tweaks reflected the government's intention to strike a balance between financial discipline and taking care of the people's interests.
"To some degree, it is a pragmatic move. Perhaps, there should be more time for consultation with industry players so that any final adjustments can be made before the rollout of such measures," he added.