MoF: SST To Be Re-Introduced In Malaysia

Now that Goods and Services Tax (GST) has been made zero-rated, the Ministry of Finance announced yesterday that the Sales and Services Tax (SST) is set to make a return.

In a brief statement to the press released yesterday, the Malaysian Ministry of Finance said:

“The fiscal reform initiative is already underway. The shortfall from Goods and Services Tax (GST) which is to be zero-rated effective 1 June 2018 will be cushioned by specific revenue and expenditure measures that shall be announced in due course. The Sales and Services Tax (SST) will be re-introduced. Expenditure reduction will begin with rationalisation, efficiency measures and reduction in wastages. Of significance, oil prices have been higher than the USD52 per barrel estimated for Budget 2018. This provides fiscal buffers for the immediate future. Fiscal responsibility, transparency and governance will be a paramount consideration in rolling-out the fiscal reform.”

The ministry did not give any indication if SST will return to its previous 10 percent value, or gave any timeline to its implementation. Without these details, it is difficult to say for certain if car prices will be increased once SST is re-introduced. When the previous 10 percent SST was replaced with a 6 percent GST in 2015, the market saw reduction in prices for nearly every make.

Now that GST will made zero rated effective 1-June 2018, the government is estimated to be losing some RM25.6 billion in revenue in the second half of this year. The latest statement by the Ministry of Finance will serve to assure the market and credit rating agencies that responsible fiscal policies will be put in place. Whether will that translate into permanently cheaper cars or not is another matter.

Update: Tun Daim Zainuddin, head of the government’s Council of Eminent Persons has announced in a press conference earlier today that SST will return in the next two to three months, without giving any further specifics about the rate to be taxed. An official announcement by the Ministry of Finance can be expected sometime next week.