PETALING JAYA: The expansion of the Sales and Service Tax (SST) is part of the government’s strategy to focus taxation on discretionary spending and not basic needs to protect vulnerable households, says the Treasury secretary-general.
According to Datuk Johan Mahmood Merican (pic), the structure of the expansion minimised the people’s burden by exempting basic goods and small service operators from SST.
Following concerns about affordability for low-income groups, Johan 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.
“The very basic goods – your chicken meat, vegetables, rice, roti – remain at 0%,” he told media practitioners attending the Concorde Club meeting via Zoom yesterday.
“Even for seafood, it’s targeted. Kembung and tilapia remain exempt while premium items like salmon and caviar are taxed.”
While imported fruits will be subject to 5% SST and local fruits remain exempt, Johan said that it was a matter of consumer choice and the policy support 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.
Regarding the expansion of the SST to include hair and beauty salons, which have been classified as non-essential services, Johan stated that the government has set clear boundaries to safeguard small businesses from the burdens of compliance.
“The smaller one-man or two-man barbershops are likely to have below the RM500,000 annual threshold and won’t be taxed.
“Larger establishments offering premium services would fall within the scope,” he said.
On the minimum wage raised from RM1,500 to RM1,700, Johan said the initiative 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 added.
The Concorde Club is an informal gathering of editors and senior journalists with politicians, policymakers and key opinion leaders.
Previous guests of the Concorde Club, led by Bernama chairman Datuk Seri Wong Chun Wai, included senior ministers and government leaders.
On June 9, the government announced a targeted review of the SST rate, which will take effect from July 1.
The sales tax rate will remain the same for essential goods, while a rate of 5% or 10% will be imposed on non-essential or discretionary goods.
The scope of service tax has also been expanded to cover six new services such as rental or leasing, construction, finance, private healthcare, education and beauty.
