The expansion of the sales and service tax (SST) is part of the government’s broader approach to place tax emphasis on non-essential spending, rather than basic necessities, in a bid to shield lower-income households, according to Treasury secretary-general Datuk Johan Mahmood Merican.

He explained that the SST framework had been designed to lessen its impact on the general public by exempting essential goods and small-scale service providers.

The Impact Will Not Wipe Out Wage Gains

In response to public concerns about the financial pressure on low-income communities, Johan assured that the anticipated inflationary effect of the expanded SST would be minimal and should not overshadow the advantages brought about by ongoing 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 journalists attending the Concorde Club session via Zoom on today. 

Kembung and Tilapia Not Subject to SST

He further noted that taxation on seafood is selective, stating that items such as kembung and tilapia are not subject to SST, whereas more luxurious choices like salmon and caviar are included in the tax scope.

Imported fruits, he said, now carry a 5% SST, while local varieties are exempt — a decision he described as both a matter of consumer preference and a deliberate policy to bolster local agriculture.

“We feel there is an element of choice. There are local fruits you can buy. It’s also about promoting local food production,” Johan added.

Are There Measures to Ease Pressure on the Rakyat?

The SST also applies to services deemed non-essential, including those in the hair and beauty sector. However, the government has taken steps to ensure that small-scale operators are not disproportionately affected.

“The smaller one-man or two-man barbershops are likely below the RM500,000 annual threshold and won’t be taxed. Larger establishments offering premium services would fall within the scope,” he said.

As part of broader economic measures, the government has increased the minimum wage to between RM1,500 and RM1,700. Johan said this initiative, together with the exemption of essential items from SST, would result in a net positive outcome for the public.

He also highlighted that recent changes to electricity tariffs would lead to lower bills for most households, and fuel subsidies would remain in place during the upcoming 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 said.

(Source: The Star)

• TAGS:
• Budget 2025
• Cost of Living
• Datuk Johan Mahmood Merican
• Government Subsidies
• Low-Income Households
• Sales and Service Tax
• SST
• Tax Policy