SST will have minimal impact on domestic consumption

KUALA LUMPUR: MIDF Research said the re-implementation of the Sales and Services Tax (SST) will not deter domestic consumption in Malaysia. 

“As compared to GST, SST does not affect consumers directly, but via manufacturer and service provider. 

“Solid economic fundamentals in the Malaysian economy particularly the stable labour market, moderating inflationary pressure and upbeat industrial activity will continue support the domestic demand to stay robust,” the research house said on Friday.

It added that the SST, which is set to be imposed on September 1, 2018, will reduce the cost of doing business, particularly for SMEs.

It noted that companies with annual revenue of RM500,000 or more are taxable under SST 2.0 compared with RM100,000 or more in the previous version of SST. 

“Fewer SMEs are affected by the new version of SST because of the higher threshold on their annual income,” it said in a report.

Out of the 907,065 SMEs in Malaysia, 693,670 or 77.0% are considered microenterprises, which have annual turnover of less than RM300,000 and less than five employees. 

This means that not more than 20.0% of the SMEs in Malaysia will be affected by the implementation of SST 2.0. 

“As GST is a blanket tax, it had affected more businesses than the single-stage SST, which covers a narrower scope,”  it said.

According to a survey carried out by SME Corp in 2015, about two-thirds of businesses perceived that GST had negative impact to their businesses and that the implementation of GST had led to higher operating costs.