Noting that the July 1 date left companies less than three weeks to prepare, FMM said the tight timeframe created unnecessary pressure on businesses even though no penalties would be enforced for non-compliance until Dec 31.

The finance ministry had said the 0% sales tax rate for basic necessities would be maintained while a 5% to 10% rate would be imposed on non-essential goods from July 1.

Meanwhile, the service tax will be expanded to include rent, lease, construction, financial services, private healthcare, and education. 

"This expansion however will come with some exemptions to avoid double taxation and ensure that Malaysians are not taxed for certain services,” said finance minister II Amir Hamzah Azizan.

Similarly, the Small and Medium Enterprises Association of Malaysia called on the government to raise the SST threshold or exempt micro and small enterprises to protect them from financial pressure when the revised tax starts.

FMM also called for a broader exemption list, particularly for capital expenditure items such as machinery and equipment used in production.

“Taxing these inputs will directly affect investment decisions, industrial upgrading, and long-term competitiveness.

“(The expansion of the SST marks) a major structural shift from a previously narrower tax base to one where nearly all categories, including industrial and commercial inputs, are now taxable,” it said.