In an interview with FMT, Treasury secretary-general Johan Mahmood Merican outlined the government’s deliberate approach to differentiate between essential and non-essential goods under the expanded tax net.
The 5% SST on imported fruits, implemented alongside broader adjustments for public service enhancement and fiscal stability, serves as a strategic nudge to consumers.
This specific measure is designed to encourage the consumption of local alternatives and strengthen the nation’s food security.
“Optional goods with alternatives are subject to 5% SST, but locally produced fruits are not subject to the sales tax,” said Johan.
The tiered approach aligns with the government’s broader vision of supporting local farmers, fostering self-reliance and reducing dependence on foreign supply chains for food.
By making imported fruits marginally more expensive, the government hopes to encourage consumers to choose locally grown options, thereby supporting Malaysian farmers and contributing to the nation’s agricultural sector.
This could lead to a boost in domestic production, variety and availability of local fruits.
Johan said local fruit production is growing, while the Federal Agricultural Marketing Authority is working to improve the quality of produce like honeydew and pineapples to offer high-quality and affordable local alternatives.
The additional revenue generated from the SST expansion, including that from imported goods, is earmarked for critical public services and social safety nets.
This includes increased allocations for initiatives like Sumbangan Asas Rahmah (Sara), providing RM100 monthly for basic necessities to 5.4 million Malaysians, and substantial investments in healthcare, such as over RM1 billion for permanent contracts and RM400 million for upgrading dilapidated clinics.
Johan said the overall SST expansion has been carefully designed to minimise the impact on the B40 and M40 income groups and protect their purchasing power.
“The ministry is focussed on daily necessities,” he added.
Essential food items — including chicken, meat, shrimp, local vegetables, rice, as well as basic processed foods like wheat flour, sardines, sugar, bread, milk and palm oil — medicines and books will remain zero-rated.
Johan said it is the government’s belief that strategically leveraging the SST can achieve multiple objectives, namely boosting state revenue, enhancing public services and encouraging sustainable domestic practices, such as supporting local agriculture for greater food security.