Expanding the SST scope may cause consumers to feel extra burdened, and the government has wisely deferred implementation to balance public sentiment, economic stability, administrative readiness and reassess its fiscal goals, an economist said. - Pixabay pic for illustration purposes, April 29, 2025
Delay in SST expansion affects govt revenue but helps public brace for impact: analysts
With US tariffs complicating economic challenges, businesses, consumers and the govt can do with extra time to be better prepared
Bernama
Updated 1 hour ago
29 April, 2025
4:28 PM MYT
Delay in SST expansion affects govt revenue but helps public brace for impact: analysts
With US tariffs complicating economic challenges, businesses, consumers and the govt can do with extra time to be better prepared
Bernama
Updated 1 hour ago
29 April, 2025
4:28 PM MYT
KUALA LUMPUR — Postponing implementation of the expanded scope of the sales and service tax (SST) could result in a short-term decline in government revenue, but is also an opportunity for traders, the market, and households to prepare for upcoming economic challenges, said an economist.
Bank Muamalat Malaysia Bhd’s chief economist Dr Mohd Afzanizam Abdul Rashid said the decision is appropriate and represents a pragmatic move by the government, considering external challenges, including the increase in tariffs by the United States (US) on certain imported goods, which will directly impact Malaysia’s export sector.
“The government’s decision to postpone the implementation of the new SST is a pragmatic step that takes into account the changing global economic landscape,” he told Bernama.
The SST expansion, initially slated for implementation in May 2025 as announced in Budget 2025, will now be deferred to a later date, a Finance Ministry (MoF) spokesperson confirmed to Bernama, in response to a report on the delay.
The spokesperson added that the ministry is finalising the scope of the expansion and applicable tax rates following nationwide engagement sessions with multiple industries.
“The guidelines and scope are now being refined to ensure a smooth implementation,” the spokesperson said.
Earlier today, Deputy Finance Minister Lim Hui Ying also confirmed the postponement of the SST expansion, citing stakeholder engagements to finalise the scope.
Mohd Afzanizam added that the government must tread carefully in implementing the SST, as it will also affect companies and export-oriented traders, particularly given that reciprocal tariffs between the US and other countries place additional pressure on open economies like Malaysia.
On economic growth, he said the government may need to revise its earlier projection of between 4.5% and 5.5%.
The International Monetary Fund (IMF) and the World Bank had recently revised Malaysia’s growth forecasts to 4.1% and 3.9%, respectively.
Meanwhile, UOB Kay Hian Wealth Advisors Sdn Bhd’s head of investment research, Mohd Sedek Jantan, said the government is likely mindful of public sentiment, especially given that the SST expansion could be perceived as adding to the cost of living at a time of economic uncertainty.
“Delaying implementation allows policymakers to better communicate the policy’s objectives and manage public response more effectively.
“But one thing I confidently see is that the postponement reflects a careful balancing act between fiscal goals, economic stability and administrative readiness.
“It shows that the government is attempting to address issues from multiple angles before implementing policies that directly impact the rakyat. The aim is to ensure a smoother rollout with minimal disruption to businesses, consumers and society at large,” he said.
Economically, the broader SST framework is expected to have a notable impact on both consumers and businesses, he noted.
“Consumers may face higher prices as firms pass on the additional tax burden, while businesses, particularly those in the sectors most affected, may need time to adjust their pricing strategies, supply chains and operational models to comply with the new requirements.
“The government may therefore require more time to fully assess these impacts, particularly in relation to trade tariffs and key economic indicators such as consumer spending, corporate profitability and sectoral competitiveness,” he said.
From an administrative perspective, Mohd Sedek noted that additional time may be required to finalise regulatory guidelines, train tax officials and upgrade digital infrastructure to facilitate a smooth transition.
He added that the postponement may also create more opportunities to engage with stakeholders, including industry groups, small and medium enterprises and consumer organisations, to address concerns and foster greater consensus, thereby reducing resistance to the change. – April 29, 2025
Bank Muamalat Malaysia Bhd’s chief economist Dr Mohd Afzanizam Abdul Rashid said the decision is appropriate and represents a pragmatic move by the government, considering external challenges, including the increase in tariffs by the United States (US) on certain imported goods, which will directly impact Malaysia’s export sector.
“The government’s decision to postpone the implementation of the new SST is a pragmatic step that takes into account the changing global economic landscape,” he told Bernama.
The SST expansion, initially slated for implementation in May 2025 as announced in Budget 2025, will now be deferred to a later date, a Finance Ministry (MoF) spokesperson confirmed to Bernama, in response to a report on the delay.
The spokesperson added that the ministry is finalising the scope of the expansion and applicable tax rates following nationwide engagement sessions with multiple industries.
“The guidelines and scope are now being refined to ensure a smooth implementation,” the spokesperson said.
Earlier today, Deputy Finance Minister Lim Hui Ying also confirmed the postponement of the SST expansion, citing stakeholder engagements to finalise the scope.
Mohd Afzanizam added that the government must tread carefully in implementing the SST, as it will also affect companies and export-oriented traders, particularly given that reciprocal tariffs between the US and other countries place additional pressure on open economies like Malaysia.
On economic growth, he said the government may need to revise its earlier projection of between 4.5% and 5.5%.
The International Monetary Fund (IMF) and the World Bank had recently revised Malaysia’s growth forecasts to 4.1% and 3.9%, respectively.
Meanwhile, UOB Kay Hian Wealth Advisors Sdn Bhd’s head of investment research, Mohd Sedek Jantan, said the government is likely mindful of public sentiment, especially given that the SST expansion could be perceived as adding to the cost of living at a time of economic uncertainty.
“Delaying implementation allows policymakers to better communicate the policy’s objectives and manage public response more effectively.
“But one thing I confidently see is that the postponement reflects a careful balancing act between fiscal goals, economic stability and administrative readiness.
“It shows that the government is attempting to address issues from multiple angles before implementing policies that directly impact the rakyat. The aim is to ensure a smoother rollout with minimal disruption to businesses, consumers and society at large,” he said.
Economically, the broader SST framework is expected to have a notable impact on both consumers and businesses, he noted.
“Consumers may face higher prices as firms pass on the additional tax burden, while businesses, particularly those in the sectors most affected, may need time to adjust their pricing strategies, supply chains and operational models to comply with the new requirements.
“The government may therefore require more time to fully assess these impacts, particularly in relation to trade tariffs and key economic indicators such as consumer spending, corporate profitability and sectoral competitiveness,” he said.
From an administrative perspective, Mohd Sedek noted that additional time may be required to finalise regulatory guidelines, train tax officials and upgrade digital infrastructure to facilitate a smooth transition.
He added that the postponement may also create more opportunities to engage with stakeholders, including industry groups, small and medium enterprises and consumer organisations, to address concerns and foster greater consensus, thereby reducing resistance to the change. – April 29, 2025
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