MAA Keeps Asking For SST Exemption Until End Of 2022

The Malaysian Automotive Association (MAA) is unrelenting in its requests to the Finance Ministry to extend the SST exemption period. Will their wishes be granted?

As it stands, June 30th, 2022 is the last day that the Malaysian government will be offering a 100% SST exemption on locally assembled passenger cars and 50% tax exemption on fully imported passenger cars, though this has seen numerous extensions since the temporary policy was enacted on June 1st, 2020.

Finance Minister Tengku Zafrul Aziz has already stated back in February that his ministry remains firm in its decision to provide no further extension beyond June 2022, which would cap the SST discount period at a full 2 years, but that has not stopped MAA from spamming their proverbial inbox with requests for appeal.

Back in late March, the MAA cited the ongoing chip shortage and resulting slowdown in factory outputs as being the main cause for a possible extension, and this has continued until May as explained by association president Datuk Aishah Ahmad to The Star.

“The MAA has appealed to the finance ministry to extend the sales tax exemption, but so far, we have not received any feedback,” she said.

The newspaper also obtained comments from RHB Investment analyst Jim Lim, who expected strong customer demand in Q2 2022 to take advantage of the remaining SST discount period.

“From the latest March production figures, we can see that carmakers are ramping up production to the best of their abilities, and amidst chip and parts shortages, to help customers take advantage of the sales tax exemption before it ends,” he said.

“When the government zero-rated the goods and services tax (GST) for three months in 2018, the temporary tax holiday created a huge surge in demand for cars.”

He also adds that local automakers Proton and Perodua, whose customers are more sensitive to price fluctuations, are more likely to be impacted by the reintroduction of SST while those shopping for cars from premium marques are less likely to be bothered by the overnight hike.

Vehicle sales in March 2022 showed very strong numbers with a total of 73,222 vehicle deliveries representing a 62.5% (28,171 unit) increase in volume over February of this year.

It is yet unclear if the projected Total Industry Volume for 2022 will be impacted should the Finance Ministry not yield before the June 30 2022 deadline as this entirely depends on the public’s response, or rather its severity.

The SST discount/exemption period that has been ongoing for almost 2 years at this point has helped the automotive industry rebound after a near standstill following the nationwide lockdown from the onset of the Covid-19 outbreak.

In 2022, the automotive industry faces yet more challenges in this crucial period of the nation’s economic recovery with the aforementioned worldwide semiconductor shortages, soaring crude oil prices, an unstable Ringgit, and an aggressive push toward the adoption of fully electric vehicles.