THE Sales and Services Tax (SST) has pushed up the cost of doing business for Malaysian manufacturers by up to 10%, according to the Business Conditions Survey by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER).

Eighty-five per cent of Malaysian manufacturers said they have experienced a rise in production costs due to the SST, which was introduced in September last year, FMM President Soh Thian Lai was quoted as saying by The Star. 

“The main factor for the higher cost, according to 36% of the respondents, was that the SST rate on raw materials, components and services is higher than the GST.

“In terms of implementation, the key technical issue faced by most respondents, or 39%, is the lack of clarity on the application of procedures for exemption,” said Soh.

The survey also found that local manufacturers have turned more cautious on their business outlook for the first half of this year.

 “We found out that our respondents mostly have lower expectations for sales, production, capacity utilisation and employment in the first half of 2019. Meanwhile, production costs are expected to increase,” said Soh.

He said while there was a pickup in activities in the second half of 2018, the local sales index remained below the 100-point confidence threshold, which shows that local sales have grown at a slower pace than export sales.

“Capital investments and employment were also higher, amid higher cost of production,” he said.

The Pakatan Harapan government had previously assured Malaysians that replacing the Goods and Services Tax (GST) with the SST would reduce cost. – February 28, 2019.