SST expansion to have minimal impact on SMEs, say economists
Small and medium contractors are not expected to be burdened by the expanded scope of the service tax, thanks to the RM1.5 million threshold.
PETALING JAYA : Exemptions for certain services and a higher threshold value will minimise the impact of the sales and service tax's (SST) expansion on small and medium-sized enterprises (SMEs), according to economists.
Aimi Zulhazmi Rashid said this allows operators such as clinic owners and small contractors to ensure their businesses remain sustainable, even as the SST's scope expands from July 1.
The Universiti Kuala Lumpur academic said customers, mostly from the B40 and M40 groups, will also benefit from the absence of any increase or only minimal increases in the service tax.
'Therefore, SMEs should not take advantage of consumers after July 1. Use this exemption to provide good and affordable services,' he told FMT.
Ahmed Razman Abdul Latiff of Putra Business School agreed that the government's move would only impact large companies.
'It is more focussed on large private businesses, and the majority of their customers are not from the B40 group,' he said.
Last week, the finance ministry announced that zero tax rates would remain for essential goods, while a rate of 5% to 10% would be imposed on non-essential items from July 1.
However, services directly impacting Malaysians such as public and some private healthcare will continue to be exempted from the service tax.
Effective July 1, the scope of the service tax will be expanded to cover rental, leasing, construction, financial services, and private healthcare and education services.
Under the new tax regime, a 6% service tax will be imposed on construction services for infrastructure, commercial and industrial buildings if the taxable value exceeds RM1.5 million annually.
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The same rate applies to private healthcare, traditional and complementary medicine, and allied health services provided to foreigners, on service providers exceeding the RM1.5 million threshold.
Malaysian citizens are exempt from paying service tax for public and private healthcare services, traditional and complementary medicine practices, homeopathy, chiropractic treatment and osteopathy.
Treasury secretary-general Johan Mahmood Merican said the RM1.5 million threshold value will ensure that SMEs such as restaurant operators, contractors and clinics are not affected by the expansion.
'We can assist in terms of administrative management,' he said in an interview with FMT.
Johan also emphasised that the SST's expansion is important to strengthen the country's fiscal position by increasing revenue to improve its social safety net without burdening the general public.
Class F Bumiputera Contractors Association president Tukiman Radion said although his members are expected to be unaffected by the service tax's expansion, there are still concerns about ripple effects.
'We are worried that building material shops will take the opportunity to raise prices. If that happens, everyone will be affected,' he said.
'So we hope specific monitoring is carried out to prevent this.'
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