FMM In The News: THE MALAYSIAN RESERVE, April 30, 2025

THE Federation of Malaysian Manufacturers (FMM) has called on the government to postpone the expansion of the Sales and Service Tax (SST) until a comprehensive review is completed, warning that premature implementation could hurt businesses and consumers.

This follows the Ministry of Finance’s delay in enforcing the changes, originally set for May 1, with the Royal Malaysian Customs Department now expecting gazettement by June 1, 2025.

FMM president Tan Sri Soh Thian Lai said in a statement that the current economic environment is not conducive to the tax expansion, citing mounting external pressures such as US reciprocal tariffs and the upcoming electricity tariff review in July 2025.

“The expanded SST coverage, without appropriate safeguards, will amplify the cost of doing business, weaken Malaysia’s industrial competitiveness and increase the financial burden on consumers through higher retail prices,” Soh said.

He urged the government not to proceed until key concerns are addressed, including a full assessment of inflationary impact, a review of tax on essential goods and raw materials, and simplification of input exemptions for manufacturers.

Soh also proposed a 12-month grace period for newly taxable businesses with targeted education and outreach, and exemptions for services rendered to licensed manufacturers to avoid double taxation.

If unresolved, Soh said the government should further defer the SST expansion beyond June 1 to avoid undermining the manufacturing sector, consumer spending, and the broader economic recovery.

The SST expansion was announced by Prime Minister Datuk Seri Anwar Ibrahim during the Budget 2024 tabling, which includes raising the sales tax on non-essential goods like imported premium food items and broadening the service tax to include more business-to-business transactions. –TMR