KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) today said the revival of Goods and Service Tax (GST) would work better than the widened scope eight per cent Sales and Service Tax (SST), as a lifeline for the country's debt dilemma, as well as shore up adequate fiscal buffers.
FMM president Tan Sri Soh Thian Lai in response to queries to Business Times said the widened scope SST, which now includes maintenance or repair service, will lead to price increases in goods sold domestically anyway, as cost of operations for businesses go up.
Maintenance or repair service covers a wide range of services such as maintenance management, corrective and preventive maintenance, calibration, adjustment, recondition, reconfigure or overhaul.
Soh said as large users of maintenance or repair services, the 8 per cent SST will increase overall manufacturing costs, having a wide impact on day-to-day operations of manufacturers.
This will make it more expensive for businesses to operate.
This in turn will force manufacturers to directly increase the costs of the final product for goods sold domestically, especially fast-moving consumer goods (FMCG) and for its export markets, making Malaysian exports less competitive.
The Ministry of Finance (MoF) also announced the expansion of scope of the service tax to include logistics services at 6 per cent tax rate.
Soh said the tax on logistics is equally burdensome as it would impact all services along the logistics supply chain which include ie forwarding agent, warehouse operators, shipping lines (domestic), shipping agents, port and airport services, freight forwarding, haulage services etc.
"The Ministry of Finance has estimated to collect an additional RM3 billion from the higher sales and service tax (SST) of 8 per cent from 6 per cent currently."
"We understand that taxes are essential for the governments to provide funds for vital public services and infrastructure."
"FMM firmly believes the revival of the Goods and Services Tax (GST) is a timely lifeline for the country's debt dilemma as well as to shore up adequate fiscal buffers in order to weather the next economic downturn," Soh said in the response.
Effective Mar 1, 2024, the rate of tax under Service Tax Act 2018 will increase from six per cent to eight per cent on all taxable services excluding food and beverages (F&B) services such as restaurants or F&B outlets, telecommunication servicesprovision of parking spaces services or logistics services.