Govt does not expect SST hike to cause sharp price increases, says Finance Ministry

PETALING JAYA: The sales and services tax (SST) hike is not expected to cause sharp price increases that would lead to an economic shock, says the Finance Ministry.

The statement pointed out the small two-percentage increase affects selected taxable services.

"The change in service tax rate does not involve services that form a basic need and intrinsic part of the rakyat's lifestyle,” said the statement on Wednesday (Feb 28).

The statement also noted the 2% increase would affect discretionary activities and business-to-business services, while key essential services such as food and beverage, telecommunications, parking and logistics are exempt.

“The government has taken a measured approach to reform our tax system, there is a balancing act that we have to consider between improving the tax base and cushioning the rakyat from any undue burden,” said Finance Minister II Datuk Seri Amir Hamzah Azizan.

Meanwhile starting March 1, electricity users over 600kWh will be affected by the sales and services tax (SST) hike from 6% to 8% among other services. The increased SST is set to generate an additional RM3bil revenue, said the Finance Ministry.

The coverage of service tax will be expanded to harmonise tax for selected services within the same industry.

Under entertainment services, karaoke centres, nightclubs, dance halls, cabarets and wellness centres are affected. Meanwhile, under brokerage and underwriting services, SST hikes are expanded to ship and aircraft brokerage, commodities and real estate.

The SST increase will also affect services like hotels, private clubs, golfing, betting, maintenance or repair services, insurance and car rental services.

The complete list of taxable services can be found on the Finance Ministry website:

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