The Federation of Malaysian Manufacturers (FMM) believe bring back the Goods and Service Tax (GST) offers better opportunities than merely widening the eight per cent scope of Sales and Service Tax (SST), as a means to reduce the national debt and raise sufficient fiscal buffers
FMM president Tan Sri Soh Thian Lai said the widened scope of the SST, which now includes maintenance or repair services, will lead to price increases in goods sold domestically, as cost of operations for such businesses go up.
Maintenance or repair services covers maintenance management, corrective and preventive maintenance, calibration, adjustment, recondition, reconfigure or overhaul and other similar work.
FMM being in the industry where there are large users of maintenance or repair services, the 8 per cent SST will increase overall manufacturing costs, having a wide impact on day-to-day operations of manufacturers, Soh said, which will increase costs for businesses to operate.
In turn, manufacturers will be forces to increase the costs of the final product for goods sold domestically, especially fast-moving consumer goods (FMCG) and for its export markets, making Malaysian exports less competitive.
Also, the Ministry of Finance (MoF) announced the scope expansion of the service tax to include logistics services at 6 per cent tax rate.
Soh said the tax on logistics is equally burdensome as it would impact all services along the logistics supply chain which include i.e. forwarding agent, warehouse operators, shipping lines (domestic), shipping agents, port and airport services, freight forwarding, haulage services and other similar businesses.
“The Ministry of Finance has estimated to collect an additional RM3 billion from the higher sales and service tax (SST) of 8 per cent from 6 per cent currently. We understand that taxes are essential for the governments to provide funds for vital public services and infrastructure.”
“FMM firmly believes the revival of the Goods and Services Tax (GST) is a timely lifeline for the country’s debt dilemma as well as to shore up adequate fiscal buffers in order to weather the next economic downturn,” Soh said in the response.
Effective Mar 1, 2024, the rate of tax under Service Tax Act 2018 will increase from six per cent to eight per cent on all taxable services excluding food and beverages (F&B) services such as restaurants or F&B outlets, telecommunication services, provision of parking spaces and logistics services.
