PETALING JAYA: The sales and service tax (SST), which was introduced in September 2018, have increased the cost of doing business among Malaysian manufacturers by up to 10%, according to a recent survey by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER).
The Pakatan Harapan government had previously assured Malaysians that the move to replace the GST with SST would reduce costs. The abolishment of GST and the introduction of SST were the centrepiece ofthe Pakatan manifesto for the 14th general election.
Speaking to at a briefing on the FMM-MIER Business Conditions Survey, FMM president Datuk Soh Thian Lai said about 85% of the Malaysian manufacturers have witnessed a rise in production costs due to SST in the second half of 2018.
“The main factor for the higher cost, according to 36% of the respondents, was that the SST rate on raw materials, components and services is higher than the GST.
“In terms of implementation, the key technical issue faced by most respondents, or 39%, is the lack of clarity on the application of procedures for exemption,” said Soh.
Based on the findings of the FMM-MIER Business Conditions Survey, the Malaysian manufacturers have turned more cautious on their outlook for the first half of 2019 than they were in the past survey, following a pickup in manufacturing activities between July and December 2018.
For context, the business conditions index has declined to 101 points, as compared to 124 points in the second half of 2018.
Business expectations have also declined for the first six months of this year.
“We found out that our respondents mostly have lower expectations for sales, production, capacity utilisation and employment in the first half of 2019. Meanwhile, production costs are expected to increase,” said Soh.
On the business conditions for the second half of 2018, Soh pointed out that activities picked up during the period, with improvement in local and export sales.
However, the local sales index remained below the 100-point confidence threshold, indicting that local sales have grown at a slower pace than export sales.
“Capital investments and employment were also higher, amid higher cost of production,” he said.