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FMM Press Statement: Manufacturers’ Views on SST Cost Impact

Kuala Lumpur, March 1, 2019 – In reference to some of the media reports and comments that were published regarding the findings of the Federation of Malaysian Manufacturers’ (FMM) FMM-MIER Business Conditions Survey 2H2018 on the cost impact of the Sales and Services Tax (SST) implementation, FMM would like to provide greater clarity and a better understanding of the survey to avoid drawing wrong conclusions from the survey. 

The views expressed by respondents were a snapshot of members’ sentiments when the survey was carried out. The survey period was from December 13, 2018 to January 26, 2019 at the point where the SST was into its third month of implementation and companies would have been still been experiencing lack of clarity, understanding of the new regime and uncertainty in the classification and treatment of taxable items. 

In discussions with the Government, FMM has been informed that the Government is committed to take actions to address the technical implementation issues and reduce costs such as introducing the tax deduction facility previously known as the credit system in January 2019 and on further expanding the exemption list to include raw materials and components used in manufacturing non-taxable goods to avoid increases in cost of doing business and to ensure a level playing field between local manufacturers and traders. 

The FMM acknowledges that the SST has addressed some of the financial and administrative burdens for manufacturers which were associated with the GST implementation previously. With SST, cash flow will improve as businesses do not need to pay input tax upfront but instead can apply for sales tax exemption on their raw materials, components and packaging. In addition, the SST regime has a lower compliance and administrative burden thus reducing cost. In addition, lesser number of companies comes under the coverage of the SST i.e. 80,000 compared to 470,000 under the GST regime. 

Based on the survey findings, most of the cost factors impacting members are those relating to items where tax rates under the SST are higher compared to the GST regime or are not eligible for exemptions. FMM has agreed with the Customs Department to investigate fully into the concerns highlighted by our members to address critical areas and where possible to take actions to relieve or lessen cost impacts and implementation challenges. 

The FMM would also like to thank the Government for refunding RM19.4 billion in GST refunds to 121,000 corporates which would otherwise have not been possible under the old regime.

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About FMM
The Federation of Malaysian Manufacturers (FMM) has been the voice of the Malaysian manufacturing sector since 1968. Representing over 10,000 member companies (3,000 direct and 7,000 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-add services, including training, business networking and trade opportunities as well as regular information updates.

Media Enquiries:
Esther Boey, Senior Manager, Research & Communication
Tel : 03-6286 7200 | Email: /

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