But how many of these concerns are factually valid?

FMT takes a look at five myths about the SST expansion to clarify what the new tax measures really mean.

Myth 1: An inflation spillover will occur

One of the most common myths surrounding the SST is that its expansion will trigger widespread inflation.

However, the SST is a single-stage tax applied only at the point of sale and does not cascade through the supply chain like the goods and services tax (GST).

It also only affects selected services.

While there may be some upward adjustments in specific sectors, fears of blanket inflation are exaggerated.

Myth 2: A spike in living costs

Another misconception is that the expanded SST will burden consumers already struggling with the cost of living.

However, many essential goods and services remain exempt, including staple foods, public transport, and education. The expanded SST only covers premium, high-value and niche goods.

Consumers may notice price changes in some areas but the overall impact on household expenses is likely to be moderate.

Myth 3: Businesses will scramble to comply

There also appear to be fears that that businesses of all sizes may be ill-prepared for the SST expansion and forced into a last-minute scramble to meet its new requirements.

In reality, the expansion was announced almost two years ago as part of Budget 2024, giving affected industries and businesses ample time to prepare for it.

Also, only businesses with taxable service revenue exceeding RM500,000 are required to register. Smaller operators will not be impacted.

Myth 4: Industrial competitiveness will take a hit

Industrial groups may worry that the expanded SST could impact Malaysia’s competitiveness, particularly when input services like logistics become taxable.

However, the SST does not apply to exports and the government has exempted business-to-business services to avoid double taxation.

Any final cost impact will primarily depend on how businesses manage their operations, and not solely on SST.

Myth 5: It’s the GST in disguise!

Some are suggesting that the expanded SST is in actual fact a disguised return of GST, but this claim ignores key structural differences.

Unlike GST, which is a multi-stage tax with input tax credits, SST is narrower and applies only once to either the sale of certain goods or the provision of specific services.

Neither does it feature the GST’s credit-offset mechanism, reducing the administrative burden on businesses.

In short, SST is fundamentally not GST in scope, design, or enforcement.

The bottom line

While the expanded SST will introduce some changes, most of the fear stems from misconceptions.

For now, the SST expansion remains a targeted fiscal move, not a disadvantageous overhaul.