KUALA LUMPUR, June 10 (Xinhua) -- A Malaysian bank said Tuesday that the expanded sales and service tax (SST) next month highlights the government's commitment to fiscal consolidation, with the 2025 fiscal deficit target maintained at 3.8 percent of gross domestic product (GDP).
Hong Leong Investment Bank said in a note that the move is expected to improve Malaysia's fiscal position through a more targeted tax approach on non-essential goods and services with minimal consumer price index impact.
The Malaysian government aims to increase fiscal revenue by 5 billion ringgit (1.18 billion U.S. dollars) (0.24 percent of GDP) with an annual target of 10 billion ringgit (0.48 percent of GDP) per year.
"From a market viewpoint, the expanded SST is seen as a non-event, with limited sector profit impact: construction is well-insulated, considering that most contract structures allow for cost pass-through, and banking demand remains largely inelastic, while healthcare providers retain a strong regional pricing advantage," the bank said.
The Ministry of Finance of Malaysia has announced the implementation of the expanded SST, which will take effect on July 1.
Under the revised framework, a sales tax of 5 percent to 10 percent will be applied to selected non-essential items.
Concurrently, the service tax (6 percent or 8 percent) will be broadened to cover additional service categories, including rental or leasing, construction, financial services, private healthcare, private education and beauty services. ■
