Extended SST Timely And Essential To Beef Up Economic Resilience
A Commentary By Nurul Hanis Izmir
PUTRAJAYA, June 12 (Bernama) – Effective July 1, Malaysians will see a revised and extended version of the Sales and Service Tax (SST), one that, on closer inspection, was carefully crafted to strike a delicate balance between fairness, economic resilience and sustainable long-term financial stability for the country.
Furthermore, the additional revenue from the SST would flow back to the people by beefing up the country’s social safety net via cash assistance programmes, improved infrastructure and public services.
Instead of a sweeping increase that would surely antagonise taxpayers, such a measured adjustment by the government is designed to support growth while ensuring the tax system remains equitable and robust for all citizens.
Rooted in Progressive Taxation
The move is timely and necessary to ensure that the country’s fiscal position is in order without burdening the average Malaysian. It is no doubt a progressive taxation formulated by the government.
This review and extension of the SST is to ensure that those with greater financial means who can genuinely afford it contribute a fairer share, while protecting the broader population from unnecessary financial strain.
For instance, if one can spend RM60,000 a year on private schooling or treat oneself regularly to manicures and massages, one is probably in a position to help the system a little bit more - financially.
The measure is pragmatic as Malaysia is well-positioned to tap its economic strengths against a backdrop of inflation holding steady at 1.4 per cent in April, growth at 4.4 per cent in the first quarter and unemployment trimmed down to 3.2 per cent.
Amid robust discussions on the new tax rates, basic necessities continue to be exempted.
Under the revised framework, Malaysians will continue to enjoy zero per cent sales tax on daily essentials such as chicken, rice, vegetables, cooking oil and medicine.
Additionally, basic construction materials remain untaxed and small businesses with revenues below key thresholds are protected through carefully calibrated exemptions.
The message is abundantly clear — essential goods are off-limits.
The changes involve discretionary indulgences and high-end consumption.
They include items like king crabs, imported fruits, silk, essential oils and hand-painted antiques, which will carry a five to 10 per cent sales tax. This is logical, considering their non-essential nature.
More significantly, the service tax net will be cast wider to cover private healthcare, education, leasing, construction, finance and personal beauty services.
But even this extension comes with clear thresholds and exemptions to avoid any sweeping impact.
Revenue returns to Rakyat
Perhaps, the most important takeaway from the SST is what the government plans to do with the additional tax collected, estimated at RM5 billion for this year alone.
“This isn’t about hoarding revenue. It’s about recycling it back to the people,” Finance Minister II Datuk Seri Amir Hamzah Azizan had said.
He had emphasised that the additional revenue will flow directly back to rakyat-centric initiatives such as enhanced cash assistance via the Sumbangan Tunai Rakyat (STR) and Sumbangan Asas Rahmah (SARA) programmes, improved infrastructure and better public services that benefit all Malaysians.
In other words, it is not just taxing for the sake of taxing but an investment to beef up the country’s social safety net.
The move also earned kudos from renowned accounting firm Ernst & Young Tax Consultants Sdn Bhd. It described the SST as a “pragmatic step towards medium-term fiscal consolidation.”
EY Malaysia’s managing partner for tax Farah Rosley said there is a need to broaden Malaysia’s historically narrow tax base, especially in light of its expanding services to the economy.
Targeted, Fair and Forward-looking
“The revised SST taps into new revenue sources while continuing to shield essential goods and services. It is targeted, fair and forward-looking,” she said.
While she acknowledged that some sectors might feel a mild pinch depending on price sensitivity and reliance on imports, the overall inflationary pressure is expected to be modest and manageable.
“Provided businesses recalibrate efficiently, price shocks should be minimal,” she said.
The impending uptake in the SST has inevitably raised questions as to the possibility of reintroducing the goods and services tax (GST), which some quarters contend covers more ground and promises comprehensive and increased revenue collection.
But it is to be noted that SST is simpler to administer, less burdensome for small businesses and does not tax ordinary Malaysians’ daily staples.
The MADANI government has opted for precision over volume and in doing so, it has maintained economic inclusivity while ensuring sustainability.
At its core, this is not just about plugging fiscal gaps. It is about shifting Malaysia’s economic gears.
The aim is to reduce dependence on low-skilled foreign labour, raise income levels and redesign the job landscape to match high-value investments.
And for that, the country needs a solid fiscal footing.
Spending on subsidies without new revenue is not sustainable. This will only drive up the debt, and future generations will be forced to pay the price.
The proposed tax reform is positioned not just as a policy adjustment, but as a step toward building a stronger, more resilient Malaysia for the next generation.
If we get this right, our children will live in a better Malaysia.
-- BERNAMA