By DayakDaily Team
KUCHING, June 10: The SME Association of Sarawak is urging the Malaysia government to implement a minimum six-month transition period and introduce practical support measures—such as tax installment plans and an increased SST threshold—to help businesses adapt smoothly to the expanded Sales and Service Tax (SST) regime set to take effect this July.
The call comes in response to the federal government’s plan to widen SST coverage to six new service sectors, a move aimed at strengthening national revenue.
While acknowledging the fiscal intent behind the expansion, the association’s president Jordan Ong warned that the implementation timeline is too rushed, particularly for small and medium enterprises (SMEs) already grappling with post-pandemic recovery and global economic uncertainty.
“Expanding SST is fiscally reasonable—it supports healthcare, infrastructure and an ageing population—but it will also increase living costs and exert pressure on SMEs’ operations, profit margins as well as the lower- and middle-income groups,” he said in a statement today.
Ong stressed that SMEs need time to upgrade accounting systems, train staff, and revise pricing strategies, especially as many sectors are still unfamiliar with the updated SST framework.
He pointed out that it has only been nine months since the SST expansion was announced in Budget 2025 (Oct 18, 2024), giving SMEs limited time to prepare.
“The reality is, most SMEs don’t have the same resources as large corporations. They’re still struggling with accounting systems reconfiguration, re-evaluating service charges, managing client communications and supply chains,” he said.
Ong warned that sectors like construction—which rely on fixed-price contracts—will be among the hardest hit. Contractors will be forced to absorb the six per cent SST, further squeezing margins and project viability.
Among the association’s proposals to mitigate impact are:
- A six to 12 month penalty-free grace period, allowing businesses to correct early mistakes without being fined;
- A “declare first, pay later” model and tax installment plans to ease cash flow strains;
- SST training programs, including hotlines and both online and in-person courses by RMCD or SME development agencies;
- Raising the SST threshold from RM500,000 to RM750,000, or adopting progressive tax bands to reduce disproportionate burdens;
- Introduction of low-interest (below three per cent) government-backed loans for SMEs to upgrade systems and compliance tools.
The association also raised concerns about market distortions, where micro-businesses exempt from SST could undercut tax-registered SMEs, particularly in price-sensitive sectors such as beauty, nail salons, and equipment rentals.
Ong cautioned that this may lead to tax avoidance or artificial business splitting to remain below the threshold.
To prevent this, he urged the government to review SST thresholds, introduce tiered tax rates, and offer rebates or tax credits to offset operational costs borne by compliant SMEs.
“SST expansion, if backed by proper support, can become a transformative step forward—not just a burden.
“SMEs are the backbone of our national economy, and with aligned policy and practical measures, this reform can lead to a more resilient and sustainable economic future for Malaysia,” he stressed. — DayakDaily
