In a research note, it said exemptions given in key sectors, such as food, healthcare and basic utilities, will prevent the expanded SST from financially burdening Malaysians.
RHB IB explained that the SST expansion primarily targets discretionary or non-essential items, such as luxury goods, entertainment and certain lifestyle services.
The research firm also expects the expanded SST to have a negligible impact – estimated at around 0.1% or 0.2% annually – on the consumer price index (CPI).
“By excluding critical sectors like food, healthcare, utilities and public transport, the expansion avoids placing undue burden on the broader economy, thereby minimising any potential drag on growth,” it said.
RHB IB also said that the additional revenue from the SST’s expansion – up to RM10 billion annually –not only strengthens government finances but also provides greater fiscal space to manage public expenditure and reduce the nation’s budget deficit.
Under the SST expansion, zero tax rates will remain for essential goods while a rate of 5% to 10% will be imposed on non-essential items from July 1.
The scope of the service tax will be expanded to cover rental, leasing, construction, financial services, as well as private healthcare and education services.
Services directly impacting Malaysians, such as public healthcare and selected medical services, will continue to be exempted from the service tax.
Meanwhile, MIDF Research assured that demand for real estate remains strong, and the impact of the SST’s expansion is expected to be minimal as residential buildings remain tax exempt.
“As for commercial and industrial buildings, we expect the SST’s impact to be limited as demand for industrial assets remains strong,” it said in a research note.
The firm also projected that new property sales would increase in the second half of 2025 in line with more active project launches and a significant rise in housing loan applications.
It noted that loan applications rose 6.1% year-on-year to RM56.2 billion in April, after recording a 4.8% growth in March.
Meanwhile, CIMB Securities said the SST’s expansion is expected to have limited direct impact on the automotive sector.
In a research note, it said vehicle sales are already subject to a 10% sales tax, while maintenance and repair services are currently subject to an 8% service tax.
“That said, there may be a slight increase in dealership and showroom rental costs, but we believe the impact will be minimal,” it said.