PETALING JAYA: The sales and service tax (SST) expansion is part of the government’s strategy to focus taxation on discretionary spending and not basic needs to protect vulnerable households, says Treasury secretary-general Datuk Johan Mahmood Merican.
He said the structure of the expansion minimised the burden on the people by exempting basic goods and small service operators from SST.
Responding to concerns about affordability for low-income groups, Johan also said the SST’s projected impact on inflation is modest and should not negate the benefits of wage reforms.
“Bank estimates show SST would only add about 0.25% to the consumer price index. So yes, there is impact, but not of a magnitude that wipes out wage gains,” he said.
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“The very basic goods… your chicken meat, vegetables, rice, roti… remain at 0%,” he told media practitioners attending the Concorde Club meeting via Zoom on Monday (June 23), moderated by Bernama chairman Datuk Seri Wong Chun Wai.
“Even for seafood, it’s targeted. Kembung and tilapia remain exempt while premium items like salmon and caviar are taxed,” he added.
Johan also said imported fruits are subject to 5% SST, while local fruits remain exempt, a move he said was both a matter of consumer choice and policy encouragement for domestic agriculture.
“We feel there is an element of choice. There are local fruits you can buy. It’s also about promoting local food production," he said.
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Hair and beauty salons have similarly been categorised under non-essential consumption.
However, Johan said the government drew a line to protect small businesses from compliance burdens.
“The smaller one-man or two-man barbershops are likely below the RM500,000 annual threshold and won’t be taxed.
“Larger establishments offering premium services would fall within the scope,” he said.
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The government has raised the minimum wage to between RM1,500 and RM1,700, an initiative Johan said would translate into a net benefit, especially when paired with the exemption of basic goods from SST.
He also pointed out that most households will see reduced electricity bills under the latest tariff adjustments and will continue enjoying fuel subsidies under the planned RON95 rationalisation.
“This combination of targeted taxation, maintained subsidies and higher wages is meant to ease pressure on the rakyat while ensuring we have the revenue to fund public services,” Johan said.
The Concorde Club is an informal group of editors and senior journalists meeting with politicians and key policymakers.
Previous guests have included Prime Minister Datuk Seri Anwar Ibrahim, Penang Chief Minister Chow Kon Yeow, Opposition Leader Datuk Seri Hamzah Zainudin, Datuk Seri Mohamad Hasan, Anthony Loke and Nurul Izzah Anwar.
