16/06/2025

BIZ & FINANCE MONDAY | JUNE 16, 2025

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Highlights of SST expansion affecting businesses THERE are significant changes to sales tax and service tax. the tax increase to the customer, and this will largely depend on the elasticity of the demand for the product or service.

1 effective date can use the exemption granted to non-reviewable contracts for one year. However, you can anticipate that the authorities will strictly scrutinise such contracts and, in the past, there has been significant disputes between the authorities and taxpayers on whether a contract is reviewable or not. We hope that this situation will not be repeated. The one-year exemption appears to be rather short compared to the previous Goods and Services Tax regime which had a five-year exemption period. MSME tenants whose turnover is less than RM500,000 need not pay service tax on rental. Such enterprises do not need to register for service tax purposes. All businesses, whether registered or not, must account for service tax on importation of taxable services. This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com). Revised tax opportunity for businesses to build up resilience: MAICCI women’s wing KUALA LUMPUR: The expansion of the Sales and Service Tax (SST) beginning July 1 is seen as a timely and strategic move that provides businesses, particularly women-led enterprises, with the clarity and space to strengthen operations and build long-term resilience. Malaysian Associated Indian Chambers of Commerce and Industry (MAICCI) women’s wing gead, Dr Hemala AP Sivam, said the government’s decision reflects an inclusive and responsive approach to policymaking that balances fiscal goals with the practical needs of the business community. “This move allows businesses, especially those led by women, to review their operations, reskill their workforce, and realign themselves to meet future demands,” she said in a statement to Bernama yesterday. Hemala, who is also the food manufacturer APS Manja Sdn Bhd’s executive director, said the revised SST framework offers a crucial opportunity for micro, small and medium enterprises, manufacturers and women entre preneurs to strengthen internal capabilities and prepare for regulatory changes. “It is a chance to optimise cash flow, invest in automation, and adopt digital tools. For women entrepreneurs balancing both economic and caregiving responsibilities, this period offers the policy clarity and structured space they need to grow sustainably,” she said. The government will implement the SST revision and expansion starting July 1 to enhance national revenue and broaden the tax base in support of long-term fiscal sustainability. Finance Minister II Datuk Seri Amir Hamzah Azizan said the sales tax rate will remain unchanged for essential goods, while a rate of either 5% or 10% will apply to non-essential or discretionary items. The service tax will be expanded to cover more sectors such as rental and leasing, construction, finance, private healthcare, education and beauty services. Selective exemptions will be introduced to avoid double taxation and to ensure that essential services for Malaysians are not burdened. Hemala urged businesses to use the current period to strengthen compliance mechanisms and engage with relevant ministries, chambers of commerce and entrepreneurial networks to ensure effective implementation. “This is not just a tax revision, it is a catalyst for dialogue, innovation and strategic transformation. We support the government’s efforts to ensure the SST framework remains transparent, equitable and aligned with national development goals.”

If it is a standalone residential development, a contractor providing services for such a development will not be subject to service tax. However, if the services are provided for a commercial development, it will attract 6% service tax. In a hybrid situation like that, the current position of the authorities is that the 6% service tax will apply to both residential and commercial portions of the development. Issues of this nature do not seem to resonate with the commercial reality. There are other instances where the interpretation based on the taxpayer’s under standing of the commercial transaction may not be in sync with the authorities’ thinking which may be based on a purely legal basis. Businesses need to be aware of the situation where they could take advantage of the business-to business (B2B) exemptions. Under the expanded scope, B2B exemption will be available for construction services, financial services and leasing/rental. Group relief is generally not available for the latest expanded list of services. Ongoing contracts that will span past the July

Some 3,400 items have been moved from the exempt category to 5% and 10% sales tax categories. Six new categories of services have been added to the service tax. Education, healthcare, and con struction services will be subject to 6%, while financial services, rental/leasing, and wellness and beauty services will be subject to 8%. These changes will take effect from July 1, except for newly registrable businesses, for whom the obligation to charge service tax will begin from Sept 1, provided they have already met the conditions for registration. Businesses are middleman acting as collectors of taxes for the government, and the underlying principle is that businesses should not incur a cost in assisting the government collect the tax. Ultimately, it is the consumer that has to bear the tax. But in reality, it is not always possible for businesses to pass on the full cost of

Generally, businesses that are in a monopolistic situation can pass on the cost, while others may have to bear some of the cost to remain competitive. Businesses are very concerned

that if the interpretation adopted by them is not accepted by the authorities, the misalignment can be expensive in the form of additional taxes and penalties at a later date when the authorities audit the taxpayers. An example would be where you have a mixed development and the land title is designated for commercial purposes, in which case the authorities take the view that despite the contract between the contractor clearly stating that his services are only for the residential portion of the mixed development, the tax treatment accorded to such a contractor will be one of a commercial development.

FMM strongly objects to Port Klang’s tariff hike

PETALING JAYA: The Federation of Malaysian Manufacturing (FMM) has expressed its strong objection to the impending tariff increase at Port Klang, which was approved by the Ministry of Transport (MoT) and officially gazetted on Friday. The federation said the cost increases come at a time when industries are already under immense pressure from global trade disruptions and significant domestic policy shifts. It noted that the new tariff increase place a severe burden on Malaysian manufacturers and further weaken the nation’s export competitiveness while eroding Malaysia’s position as a preferred regional trade and logistics hub. To note, the overall tariff revision at Port Klang, amounting to a 30% increase, will be implemented in three phases, with the first phase taking effect on July 1. Among the key changes that will heavily impact importers and exporters are a 30% hike in container handling charges and a steep escalation in container storage charges, which are set to rise by between 197% and 243%. FMM president Tan Sri Soh Thian Lai said while the association notes MoT’s decision to stagger the port tariff increase over three phases following engagement with FMM and the Malaysian National Shippers’ Council, FMM maintains that the timing remains deeply concerning. “The sharp initial escalation beginning July 1, 2025 poses immediate and damaging consequences to the cost structures of exporters and importers alike. “This comes at a time when industries are already contending with unresolved external shocks, including the ongoing US tariff threats on Malaysian exports, the expansion of the Sales and Service Tax (SST), and a scheduled restructuring of electricity tariffs. “The convergence of these cost pressures will deliver a heavy blow to manufacturers and exporters at a critical juncture in Malaysia’s economic recovery, further eroding the country’s export competi tiveness,” Soh said in a statement. Under the newly gazetted tariff structure by the Port Klang Authority, container handling charges for a 20-foot container will increase by 30% in total, implemented over three phases. The current rate of RM300 will eventually rise to RM390, with an estimated

o Increase places severe burden on Malaysian manufacturers and weakens country’s export competitiveness, warns federation

FMM says Malaysian ports have traditionally enjoyed a competitive edge due to reasonable cost structures.

investors and could significantly disrupt trade flow and business planning at a time when manufacturers are already struggling with margin pressures, high logistics costs, and global uncertainty,” Soh said. FMM said the government must take a holistic view of the cascading cost impacts on Malaysian businesses and consumers. “Port tariffs, SST expansion, electricity hikes and international trade headwinds must be evaluated together. No single ministry or agency can make isolated decisions without assessing the full burden being placed on industry,” Soh said. FMM called for an immediate pause in the implementation of the port tariff increase, electricity base tariff revision and expanded SST scope. “We urge the government to reconvene with industry stakeholders to reassess the economic and operational consequences and align all measures under a coordinated national cost impact strategy. If these measures proceed as scheduled, July 1, 2025 will mark a critical inflection point for Malaysian industry.

RM90 added per container upon full implementation. Given that Port Klang handles about 12.5 million TEUs annually, the full increase could translate to an additional RM1.125 billion in annual costs to industry once all phases are in effect. Soh noted that Malaysian ports have traditionally enjoyed a competitive edge due to reasonable cost structures. “However, with the new rates, container handling fees will approach US$120–130 (RM509-552) per TEU, similar to rates in Singapore and Hong Kong, but well above Asean neighbours such as Vietnam, Indonesia, and Thailand. “This will erode Malaysia’s value proposition and increase the risk of cargo diversion to competing regional ports. “Furthermore, Malaysia’s drop to 34th in the IMD World Competitiveness Ranking and its current standing at 26th in the World Bank’s Logistics Performance Index highlight the urgency of containing cost escalations. “This tariff hike sends the wrong signal to