PETALING JAYA: The upcoming expansion of the sales and service tax (SST) is expected to weigh in on the local consumer sector amid rising cost pressures, says RHB Research.
The research house said the imposition of a 5% to 10% sales tax on selected non-essential goods and an 8% tax on additional taxable services could have both direct and indirect implications for the sector.
“We believe this is negative for the sector as it will weigh in on consumers’ spending power and further dampen the already subdued consumer sentiment,” said RHB.
Retailers with a significant mall footprint, such as Padini Holdings Bhd
, Focus Point Holdings Bhd, Aeon Co (M) Bhd and MyNews Holdings Bhd, are more exposed to the risk of landlords imposing higher rental expenses to pass on the SST costs.
Under a worst-case scenario where the 8% service tax is fully applied to all rental charges in mall locations and passed entirely to tenants, RHB Research estimated earnings sensitivity could range between minus 5% and minus 22% for these retailers.
In contrast, companies operating primarily in non-mall locations, such as 99 Speed Mart Retail Holdings Bhd and MR DIY Group (M) Bhd, are expected to be less impacted, as many of their premises fall below the SST taxable threshold.
As for food and beverage (F&B) manufacturers, the impact is likely to be minimal.
RHB Research noted that most newly taxed items under the revised SST, such as imported premium food and luxury goods, do not fall within the core raw materials or product offerings of the F&B companies under its coverage.
Coming to earnings, RHB Research expects the consumer sector to experience a softer second quarter following a solid first quarter in 2025, where 11 out of 14 companies under its coverage met expectations.
This is taking into consideration the combined effect of SST-related inflationary pressures, the anticipated rollout of the petrol subsidy rationalisation, and the frontloading of festive-related sales.
To mitigate the impact, the research house said retailers are expected to adopt more aggressive promotional strategies to sustain footfall and sales volume.
Nevertheless, RHB Research believes consumer spending will continue to be supported by stable employment, wage hikes in both the public and private sectors, and ongoing government assistance for lower-income households.
