1. Will I be charged 8% SST?
Source: Facebook
There have been a lot of rumours circulated by the netizens saying that you’ll have to pay 8% SST. Please don’t trust these fables.
Let’s break it down:
- Sales Tax: Imposed at either 5% or 10%, depending on the type of goods
- Service Tax: Imposed at either 6% or 8%, depending on the type of service
These taxes are not cumulative and are not applied at the same time on the same item or service.
As explained by the government, Sales Tax is charged at the manufacturer or importer level, while Service Tax is charged at the consumer level on specific services.
Still confused? Let’s take a look at the graphic below to understand how SST works and how it differs from GST. Here's a quick comparison between the two tax systems.
| Goods and Services Tax (GST) | Sales and Service Tax (SST) |
|---|---|
| Multi-stage tax | Single-stage tax |
| Broad-based, levied on all goods and services, including imports (unless specifically excluded) | Levied on all locally manufactured/imported goods and certain prescribed services |
|
Sales tax: 5% or 10% Service tax: 6% or 8% |
| Mandatory registration upon reaching a threshold of RM500,000 (voluntary registration also possible) | Has generated over RM500,000 within a 12-month operation. |
| Input tax can be offset against output tax | No tax credit mechanism |
| Returns filed either monthly, bi-monthly, or quarterly (with the option to request an alternative filing period) | Returns filed on a bi-monthly basis |
* Subject to change.
Source: Ernst & Young
Based on the table above, every layer of the supply chain - from the supplier, manufacturer, retailer, to the consumer- needs to pay 6% GST on top of other charges to Customs. This may have caused businesses to increase their prices, which explains the hefty cost of goods during GST implementation.
As for SST, the 5% or 10% sales tax (also known as single stage tax) is only imposed on the manufacturer level, while the 6% or 8% service tax will be charged by businesses (to consumers) mostly in the hospitality industry i.e. hotels, restaurant, pubs, and spas, under license by the Customs Department. It can also be charged by a professional (or consultancy services), like a lawyer or an accountant.
2. Will businesses take advantage to hike up prices?
Any business entity is said to be driven by profit maximisation. So there is a possibility for the unscrupulous businesses to exploit this SST expansion.
Source: Facebook
With the SST expansion now in full swing, many businesses are finding it hard to absorb the additional costs. Multiple business chambers and industry players have voiced their concern that price hikes are almost inevitable, especially in sectors like food and beverage (F&B) and retail rentals.
Datuk Ng Yih Pyng, President of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), explained that businesses now need to pay higher sales tax when replenishing their stock,
"They may have to pass [the cost] on to consumers for goods and services that are subject to SST."
To avoid this matter from happening, Lee Heng Guie, Executive Director of the Socio-Economic Research Centre, previously suggested that Malaysia’s relevant price enforcement ministries publish a price guide of pre- and post-SST on items such as basic necessities and consumer durables to raise price awareness among consumers.
3. People say the SST expansion will further burden the consumer - true or not?
Since Malaysians won’t be charged tax for every single thing, we believe that your tax burden will be reduced. If the same SST’s schedule is used (referring back to the graphic in point 3), you’ll get to save some monies.
In a statement, AmBank Group chief economist Anthony Dass shared: “For consumer items such as food and beverage and retail, we can expect prices to be slightly lower around 3% from the savings of input costs. This will bode well for the retail business.”
Opposing this statement is Malaysian Association of Tax Accountants (MATA) president, Datuk Abd Aziz Abu Bakar. He told the local daily that prices are expected to rise, given that goods will be subjected to tax similar to the ones before GST was implemented.
To support this statement, Sunway University Business School professor of economics, Yeah Kim Leng, said: “Overall, the tax burden will be reduced by an estimated RM10bil to RM15bil. This amount is the overall increase in disposable income for consumers. Depending on the types of goods and services that will be subject to the SST, the price impact will vary by income groups according to what they consume.”
To add on, our finance minister had also made a clarification on this matter, saying that SST will not burden the people more than the GST, as the government will only collect RM21 billion for a full year compared with the previous government's projected GST collection, which was RM44 billion for 2018.
Basically, the government will be ‘returning’ RM23 billion back to the rakyat.
Additionally, based on an official statement, GST is a cradle-to-grave tax that covers 60% of the CPI (Consumer Price Index) Basket of Goods and Services, as compared to SST, which is taxable on only 38% of the CPI Basket of Goods.
The question is - Does Pakatan Harapan really know what they're doing in terms of keeping the rakyat's best interests at heart with the reintroduction of SST (which many seasoned economists and researchers have considered backwards)?
Or, are they just winging it? Because GST is implemented in a majority of developed nations worldwide. In fact, there are currently 160 countries that have VAT/GST - surely all those countries must have a formula for success.
4. What about car prices?
Here’s the thing: if you are eyeing a second-hand car, the price will remain unaffected, just like during the SST implementation. This is because the SST only applies at the manufacturer or importer level, not during resale or second-hand transactions.
However, if you look for a brand-new car, the situation might be a bit complicated. Under the expanded SST, the Sales Tax rate has increased from 6% to 8% on certain goods and services, including some automotive components and vehicle-related services. While this doesn’t directly raise the tax on entire vehicles, it may lead to higher production costs, which car manufacturers and distributors could pass on to buyers.
In previous years, some car distributors absorbed SST temporarily for bookings made before the tax deadline to protect their brand image and maintain customer satisfaction. We may see the same again this year, but it’s entirely at the discretion of the distributor. Brands like Mazda and Toyota had done this in the past, offering some relief to customers whose car deliveries were delayed past the SST implementation date.
So far, no major automakers have publicly committed to absorbing SST in 2025, but it’s worth checking with your preferred dealer. If you’re looking to lock in a better deal, buying before 1 September 2025 (when businesses must start charging SST) might save you a few thousand ringgit.
So, what say you?
There you have it. We hope that the answers help you understand what SST is all about and how it will impact your daily lives. All in all, there seems to be a lot of uncertainty at the moment. Maybe it’s best to wait for the SST Bill details that will be announced when the new SST Bill is tabled in parliament next month.
What about you? Do you think the cost of living will increase with the new SST system? Let us know your thoughts in the Facebook comment section.
*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.
