THE proposed Sales and Service Tax (SST) increase from 6% to 8% will lead to a further spike in prices of retail goods and services, which will affect spending, Retail Group Malaysia said.

The retail association’s managing director, Tan Hai Hsin, said although the food and beverage (F&B) and telecommunication sectors are not affected, the retail prices at F&B outlets will increase.

“This is because this increment will affect the entire food supply chain, including importers, distributors, logistic companies, retail property owners and others.”

He also questioned the government’s mechanism on implementing the SST increase.

“There is no time frame given on the increment. Also, will it be a gradual increment (6-7-8% over a period of time) instead of a one-time increment (6-8%)?

“Therefore, the impact cannot be determined now,” he told The Malaysian Insight.

In the tabling of Budget 2024, Prime Minister Anwar Ibrahim announced the proposal to raise the SST rate to 8% from 6%.

In order not to burden the people, Anwar said the increase would not cover food, drinks and telecommunications services.

Tan, however, said it was good to know the budget has increased the subsidies for households and persons to battle rising inflation.

He said 50% of the RM58.1 billion will be allocated for the control of price of goods and services for the benefit of the people.

“Implementation of the Rahmah Sales Programme offers basic necessities at prices 30% cheaper across the country.

“The Rahmah Cash Contribution (STR), which is to increase by RM2 billion, is expected to benefit 60% of the adult population in Malaysia.

Tan said the maximum rate of the STR will increase from RM3,100 to RM3,700 and the minimum rate of STR for the youth will increase from RM350 to RM500.

“The first household distribution of STR will start before Ramadan 2024 and it will increase from RM300 to RM500,” he said.

“Rahmah Foundation Contribution (Sara) will increase to 700,000 STR recipients with RM100 per month for a period of 12 months. First payment will commence in February 2024.”

Tan also questioned the high-value goods tax of 5% to 10% expected to be implemented next year.

He said this is similar to the proposed luxury tax that was supposed to be implemented by the second half of this year.

“However, no details have been given on what are considered high-value goods. Is the iPhone a high-valued item?

“Is an imported sofa of more than RM10,000 a luxury item? Is a limited-edition pair of sneakers that cost more than RM1,500 high-end goods?”

He also said it was a good move to relax visa entry under the Malaysia Visa Liberalisation Plan, especially for tourists from India and China.

“However, the tax refund on high-value goods tax must be implemented. Tourists must be allowed to claim back the tax paid.”

He said shopping is an important contributor to tourism expenditure in Malaysia.

“We are still working hard to attract international tourists back to Malaysia.

“We are still rather far away from 2019. We need more aggressive strategies from the Malaysian government to attract more international tourists.” – November 28, 2023.