Impact of SST for Malaysian consumers

Malaysia reinstates the Sales and Services Tax (SST) for the Goods and Services Tax (GST) transfers that began on 1st September 2018. The SST tax rate is set for 5% and 10% for sale and 6% of the services. While writing, the list of exempt items from the STS is still being corrected, takin

Posted May 5,2019 in Economics and Trade.

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Impact of SST for Malaysian consumers

 Prior to the implementation of the SST, the finance minister, Lim Guan Angy acknowledged the impact of the SST but urged people to assure that the impact of GST would be reduced, mainly due to annual collection from SST, only $ 21 million will be compared to RM 44 billion with GST system.


Managing Director of Matin Mohammad Holdings Dato Haji Amir Ali Bin Madeen has openly said that the government is making a big mistake (in the SST implementation), representing more than 4 percent SST rates, which will definitely lead to inflation. He said the GST is more transparent than the SST that means the compass.


Car prices increase ... not yet

Prior to the implementation of the SST, a report from The Star said that customers expect the prices of cars to increase by about 2% to 3%, which corresponds to another report at


But Minister Lim said, customers will enjoy less than RM2,000 and RM3,000 for at least five brand cars. It includes Peruda, Honda, Toyota, FoxWagon and BMW.


Datuk Madani Sahari, Chief Executive Officer of Malaysia Motorcycle Institute (MAI) said that implementation of SST actually reduced the price of the car, but most of the cars produced in the country only. Sanaway University Business School economist Prof. Yeh Kim Langa said that the SST is not being collected at every stage of a single-stage tax and supply chain and so the prices of cars have decreased. He also said that the demand for car makers to increase the prices of the cars is increasing in competition with the competition.


The cap in price movements for consumers items

Datuk Aung Sai, chairman of the Kuala Lumpur Hawkers and Petty Trades Association (KLHPTA) said that the SST did not cause any sharp increase or fall in the prices of the goods sold by the hawkers and traders.


Annual revenue was collected from RM 500,000 under GST, SST was not implemented in 75 percent shops and restaurants. Minister Lim said that just 4,327 restaurants were registered under SST under 15 Govt. Of 15,574.


In addition, for the selected products including beauty products and skin care, cosmetics, mobile phone accessories, watches, tires, tires and tubes for motorcycles, the SST has been fixed at 10% to 5% initial rate.


Edge: After the implementation of the SST, tobacco companies increased the prices of cigarettes from 1% to 4%. Cigarette prices have increased by 1.18% and 4.35% respectively, respectively, between 20s and 50 sen. 

House price will not reduce…. Or will it?

While the Finance Minister expects house prices to reduce because basic building materials like cement, bricks and certain steel products are exempted from SST, industry players think otherwise.


Building Materials Distributors Association of Malaysia (BMDAM) President Bill Lee said that price movements are affected by many factors including overhead, exchange rates, demand and supply as well as profit margin. This is echoed by Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) head of taxation committee Koong Lin Loong, who said that the cost of purchasing a property may not change as there are other services involved in the construction and in the transaction of a property that are not SST exempted.


Legal practitioner Dominic Tan, founder of PW Tan & Associates said property buyers should expect a greater tax burden for the use of professional services rendered by solicitors, architects and engineers.


Lim made extra effort by asking developers to reduce house prices on a national level. He also threatened to reimpose the SST on construction services if developers do not pass the savings to buyers, but later news reported that Lim acknowledged that land prices are dependent on locality and are decided by market forces.


The Real Estate and Housing Developers Association (Rehda) said cheaper construction costs doesn’t necessarily translate to lower house prices. Immediate past chairman Jerry Chan said developers need to also consider labour, property market conditions, compliance costs and the cost of land.


However, all is not bad for house buyers though. The Penang chapter of Rehda recently announced six and 10 per cent discount on house prices. Penang Rehda chairman Datuk Toh Chin Leong announced that prices of houses costing RM300,000 and above will cost 10 per cent less, backdated to 1 September 2018. He added that purchasers who buy houses costing below RM300,000 will enjoy a discount of six per cent and is applicable to existing projects or new ones.


Rehda president Datuk Soam Heng Choon said the association is studying the exact savings from the SST exemption before concluding new house prices. “The amount of savings will then be passed on to consumers,” he said. Rehda is expected to resend the report before the 2019 Budget announcement.


To this, Minister Lim gave property developers until the end of October to submit reports on savings made as a result of SST exemption on construction materials, before the government decides to either revoke or retain the benefit.


All is not gloom despite SST

Despite expectations and perceptions of the implementation of SST, be it negative or positive, all is not gloom. Data from Nikkei’s September Purchasing Manufacturer’s Index (PMI) showed that Malaysia’s manufacturing condition is the strongest for 10 months, driven by a faster rate of job creation. Director of Economic Indices, IHSMarkit, Paul Smith said Malaysia’s manufacturing economy defied challenges of the SST to register the strongest Manufacturing PMI growth in ten months in September.


While the World Bank sees Malaysia’s economy growing at a slower pace from this year to 2020, it also expects the fiscal deficit to narrow, depending on the economic growth. In its outlook report issued recently, the World Bank also expected growth to moderate to 4.9% this year and 4.7% next year and at 4.6% in 2020. Malaysia economy grew at 5.9% in 2017. As for the fiscal deficit, it sees its narrowing from 2.9% this year to 2.8% next year and 2.5% in 2020.


Time needed to review impact of SST

Dr. Veerinderjeet Singh, chairman of the taxation committee of the Malaysian Institute of Accountants said that a two-year time frame will be good to get an idea of whether the system is stable and for assessment of the system. Ernst & Young Tax Consultants Sdn Bhd director Jalbir Singh said that the impact of SST can only be seen and evaluated as early as January 2019 and more time should be given to make adjustments and transitions.


House price will not be reduced .... Or will it be?

The Finance Minister wants to reduce the price of the house, because basic building materials such as cement, bricks and certain steel products are exempted from the SST, otherwise the artists think.


Building Materials Distributor Association (BMDAM) president Bill Li Lee said in Malaysia that along with overhead, exchange rate, demand and supply, profit margins are influenced by many reasons. It is brought to the Association Chain of Chambers of Commerce and Industry of Malaysia (ACCIMM), which is headed by the chairman of the tax committee, Co.Long Lung, who says that the cost of the property can not be changed, because the SSA is not a property involved in the construction and trading services.


Legal practitioner Dominic Tan, founder of PW Tan and Associates, said that the expectation of greater tax burden for the use of the professional services provided by property buyers solicitors, architects and engineers.


Extreme efforts have been made by Lim's developers to reduce the price of the house at the national level. Although the developers did not save the savings, the construction services threatened to rebuild the SST, but the latter reported that Lim admitted that land prices were locally dependent and decided by market forces.


Real Estate and Housing Developers' Association (Reida) said, cheap construction costs can not translate to reduced housing costs. Immediately former Chairman Jerry Chan said that the developers should consider the labor, property market conditions, compliance costs and land costs.


However, though not all bad for home buyers. Rehana's Penang chapter recently announced the price of house six and 10 percent discount. Penang Reharder Chairman Datuk Taicho Chin Liong has announced that the prices of Ram 300,000 and above homes will be 10 percent less, which will be reviewed on September 1, 2018. He also said that those purchasers who buy the house below RM300,000 will enjoy six discounts and purchase existing ones or existing projects or new ones.


Rehanda president Datuk Sonam Hena Chun said, before the end of the association's new house price, studying the proper savings from the SST concession. He said, "Then the amount will be sent to the customers". Rehada is hoping to re-send this report before the announcement of the 2011 budget.


For this reason, Minister Lim gave property developers to submit the savings certificate generated by the SST exemption in construction materials till the end of October, and the government decides to retract or retain the decision.


Not all sorrow despite the SST

Despite the expectation and realization of SST implementation, whether it is negative or positive, it is not frustrating. The information obtained from Nike's September Buyer's Manufacturers Index (PMI) shows that the situation in Malaysia's manufacturing situation creates the most powerful work for the fastest 10 months. Economic Index, IHSMKIT, Paul Smith, Director. Malaysia's manufacturing economy registers the strongest manufacturing PMI growth in the tenth month in September, in response to the SST challenge.


The World Bank thinks Malaysia's economy is declining by this year and 2020, depending on the economic growth, there is hope of narrowing the fiscal deficit. In its viewpoint recently published, the World Bank hopes to increase this year's growth rate to 4.9% and the next year to 4.7% and 2020 to 4.6%. Malaysian economy grew 5.9% in 2017. Due to the fiscal deficit, it is 2.9% from the year 2.8% in the next year and 2.5% in 2020.


Time required to review the effect of the SST

Malaysian Institute of Accountants Taxation Committee Chairman. Birender Singh said that the system is stable and the system evaluation will be good for a two year time frame. Jabalir Singh, director of SNND & Young Tax Consultants SNN Bhandar, said that the impact of the SST will be seen only in January 2011 and can be evaluated and more time to adjust and change.