Madeline Berma said projections released by the finance ministry and research houses suggest that the expanded SST—which came into force yesterday—should only have a limited short-term effect on inflation, with increases projected at between 0.25% and 1.6%.
The senior fellow at Institut Masa Depan Malaysia noted that the SST’s expansion was predominantly focused on luxury goods, entertainment and lifestyle services. As a result, she said it was not expected to cause a significant dent in household purchasing power, thereby limiting inflationary pressures.
However, Madeline said the government must monitor prices to prevent a sudden spike in living costs arising from profiteering activities.
“The public must cooperate by providing information and evidence regarding unjustified price hikes to the domestic trade and cost of living ministry,” she told FMT.
Under the SST expansion, essential goods will continue to be tax exempt while a 5%-10% levy will be imposed on non-essential items from July 1.
On Friday, the government announced that imported apples, oranges, mandarin oranges and dates will be exempted from the SST. Also exempted are beauty services such as manicures, pedicures, facials and hairdressing.
In addition, the finance ministry said the registration threshold for businesses engaged in leasing, rental and financial services has been raised from RM500,000 to RM1 million, limiting the number of affected small businesses.
The government is broadening the SST base to strengthen the country’s fiscal position in line with its long-term goal of increasing national revenue and strengthening basic health, education and social protection services, without unduly burdening consumers.
Abu Sofian Yaacob, from i-CATS University College, said that although the economy may see slight inflationary effects over the next 12 months, these are likely to taper off thereafter.
He said the B40- and M40-income groups are likely to experience minimal impact as they generally do not consume imported goods or high-end food items, such as king crabs.
Abu Sofian proposed that the government revisit the list of goods and services covered under the SST expansion some time in the future.
“The Cabinet should review the list if inflationary pressure exceeds projections,” he said.