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KOTA KINABALU: The Federation of Sabah Industries (FSI) has raised concerns over the expanded Sales and Service Tax (SST) scope effective July 1, warning it could burden SMEs and fuel inflation in the state.

FSI Treasurer Sylvester Chua (pic) said Sabah businesses are already operating under higher costs than those in the peninsula, with the SST expansion likely to increase prices for consumers.

While welcoming the Sales Tax exemption on apples and oranges, Chua said local businesses need more time to manage their costs before additional taxes are introduced.

He also pointed to the upcoming 2 per cent EPF contribution for foreign workers in October as another pressure point, warning it could strain manufacturers’ cash flow during peak operational months.

FSI has urged the government to delay the SST expansion to Jan 1, 2026 and consider tax exemptions on essential raw materials to ease the transition for Sabah’s SMEs.