Broader SST to fund essential support for B40 and M40, says Treasury sec-gen
Treasury secretary-general Johan Mahmood Merican said the SST expansion is part of a long-term fiscal reform plan under the Madani economic framework aimed at restructuring the national economy. (Bernama pic)
KUALA LUMPUR : Treasury secretary-general Johan Mahmood Merican says 5.4 million Malaysians in lower- and middle-income households stand to benefit from an expansion to the sales and service tax (SST) regime, set to kick in on July 1.
In an exclusive interview with FMT, Johan said the expected boost in revenue will allow the government to scale up its financial assistance to members of the B40 and M40 income groups, such as the monthly Sumbangan Asas Rahmah (Sara).
The number of recipients for the Sara programme has expanded significantly to 5.4 million since April, compared to just 700,000 previously.
'As the prime minister highlighted in his 2025 budget speech, increasing government revenue is essential to enhancing services for the rakyat.
'This expansion of the SST is driven by three primary objectives: improvement of services to the people, responsible fiscal management and making fiscal space to face global uncertainty,' Johan said.
He also said that the government has taken various measures to safeguard the B40 and M40 groups from the adverse effects of the SST adjustments.
Crucially, he said, the finance ministry has ensured that the SST expansion targets only non-essential goods and services, ensuring that daily expenditure for families in the B40 and M40 groups remain largely unaffected.
This fiscal management is part of the Madani economic reform agenda, with a focus on reducing the deficit from 5.5% in 2020 to a targeted 3.8% in 2025.
Putrajaya is also directing additional spending towards healthcare—allocating over RM1 billion for permanent contracts and RM400 million to upgrade dilapidated clinics, as well as making further investments to improve schools and rural infrastructure.
'The ministry focuses on daily necessities—there is also an element of evaluation,' said Johan.
Essential items like unprocessed foods (chicken, meat, local vegetables, rice), basic processed foods (flour, sardines, sugar, bread, milk, palm cooking oil), medicines and books will continue to be exempt from SST (0%).
Elaborating on the classification, Johan explained that the government differentiates between daily necessities and optional goods. While basic items like sardines, tongkol, and kembung remain at 0% SST, premium items such as imported fruits and premium seafood like salmon, cod, and king crab will be subject to a 5% SST.
'Optional goods with alternatives are subject to 5% SST, such as electrical appliances and processed foods like jam,' he added.
Local fruits are not subjected to sales tax, with only imported fruits incurring a 5% tax.
Johan expressed hope that the exemptions given would encourage the consumption of local produce.
The domestic trade and cost of living ministry also actively monitors prices to prevent profiteering, with increased enforcement activities and the provision of affordable alternatives through Jualan Rahmah and Agro Madani.
Addressing concerns about potential inflation due to profiteering, Johan assured that the ministry will intensify its monitoring of prices at retail outlets and supermarkets.
The government has clarified that the current SST adjustment will not see any increase in the SST rate, currently set at 0%, 5%, and 10%. Instead, it seeks to expand the scope of the tax, shifting certain optional goods from 0% to 5%.
Unlike the Goods and Services Tax (GST), the SST remains more targeted, minimising the burden on lower-income individuals. For instance, service tax on work and education is primarily levied on non-citizens, with the tax imposed on private schools fees which exceed a set threshold.
Johan described the SST expansion as part of a broader, long-term fiscal reform plan under the Madani economic framework aimed at restructuring the national economy and improving the welfare of Malaysians.
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