KUALA LUMPUR — The Small and Medium Enterprises Association Malaysia (SAMENTA) has expressed deep concern over the government’s decision to expand the Sales and Service Tax (SST) effective July 1, warning that the move could severely burden small businesses already under economic strain.
While acknowledging the government’s need to boost revenue, SAMENTA President Datuk William Ng said the timing and scope of the SST expansion pose serious challenges for small and medium enterprises (SMEs), many of which are still grappling with high input costs, weaker consumer spending, and slowing external demand.
“The upcoming expiration of the United States’ reciprocal tariff pause on July 8 threatens to dampen Malaysia’s export competitiveness further,” said Ng.
“Against this backdrop, the SST expansion risks compounding the pressure on SMEs, especially in terms of increased costs for rent and business-to-business services now falling under the tax.”
SAMENTA is calling on the government to urgently revise the SST threshold for SMEs. The association has proposed that micro and small enterprises, as defined by SME Corp, be exempted from the expanded scope. Alternatively, it suggests raising the threshold from the current RM500,000 in annual turnover to RM2 million, which would exclude the smallest businesses from new tax obligations.
“The increased costs will almost certainly be passed on to consumers, exacerbating the rising cost of living,” said Ng.
SAMENTA also urged the Royal Malaysian Customs Department (RMCD) to issue immediate, sector-specific guidance to help SMEs understand and comply with the new tax requirements. Ng warned that many small businesses lack access to professional tax advice and may unintentionally fall foul of the new regulations despite the government’s announced grace period until the end of 2025.
Further clarification is also needed on whether SST will be applied at the point of invoicing or collection during the transition period.
“There’s uncertainty for businesses that have already issued invoices before the July 1 implementation date,” he said.
While reiterating SAMENTA’s support for a fair and transparent tax framework, Ng emphasised the need for careful calibration of fiscal policies to reflect current economic realities.
“Although we were briefed on the SST expansion, it cannot be considered a proper consultation when presented as a fait accompli,” he said.
In conclusion, Ng stated that SAMENTA remains committed to working with the government to ensure fiscal reforms succeed, without jeopardising the resilience and dynamism of Malaysia’s vital SME sector.