SST hike on selected services to soften impact on people
Published on: Saturday, March 02, 2024
By:
FMT, Predeep Nambiar
Farah Rosley and Veerinderjit Singh believe the increase in the SST rate will have little impact on business and consumers.
PETALING JAYA: The 2% increase in the sales and service tax (SST) will have a minimal impact on consumers and businesses, according to tax experts.
They pointed out that the higher tax rate will be imposed only for selected sectors while some big businesses may even be able to defray the additional cost with tax incentives that they will receive.
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Veerinderjit Singh, senior tax policy advisor at KPMG, said the impact of the rise in SST “is not going to be that pronounced” on consumers.
“For instance, if an air-con repair bill is RM300, it will be RM324 when taxes are accounted for. It’s not that huge,” he said.
“It is also fortunate that the increase applies only for certain types of services,” he added.
He also pointed out that food and telco services are exempted from the increase.
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Veerinderjit said that setting aside inflation, which is a given, the rate of increase is reasonable. “But the government must find ways to ensure that the increase does not push prices up too high,” he said.
He said the RM3 billion that will be raised with the tax increase should go to those who need it.
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It can also be used to push for a more balanced budget in the coming year, he added.
“The government needs to build its tax revenue. We have been talking about tax reforms but how do you reform without raising taxes?” he noted.
He commended the government for sparing the food and beverage as well as the telco sectors from the increase, pointing out that those are necessities.
Otherwise, he said, people should understand that the government has to raise revenue through taxes.
“So let’s just accept it and move on. We just need to manage our budget a bit better,” he said.
Veerinderjit said the government should also focus on abolishing taxes for transactions between businesses and granting tax cuts to lessen the impact of price increases.
He said removing “tax on tax” (imposing taxes at every step of the supply chain) will prevent a compounding effect of the SST hike and reduce the overall tax burden on businesses and consumers.
Veerinderjit said Putrajaya should also aim for a surplus budget in future. “It will be helpful for a rainy day or for urgent purposes,” he added.
EY Malaysia tax managing partner Farah Rosley said large businesses are actually getting some form of tax incentives.
She cited the investment tax allowance for spending on capital expenditure as one such incentive.
“So the big businesses may be paying the additional 2% in SST but they also get deductions, investment tax allowances and pioneer incentives,” she said.
Farah said the government should use the additional revenue from the SST hike to propel the economy.
This is especially important at a time when the global economy is fraught with crisis, she added.
The SST rate has been raised from 6% to 8% with effect from yesterday.
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