PETALING JAYA: The country’s largest manufacturers’ group has explained its claim that the cost of doing business escalated after the introduction of the sales and services tax (SST).
In a statement, the Federation of Malaysian Manufacturers (FMM) said most of the cost factors impacting members are related to items where the SST tax rate is higher than the 6% goods and services tax (GST) rate or they are not eligible for exemptions.
It added the FMM-MIER Business Conditions Survey 2H2018, which raised the issue of the SST’s impact, was carried out in the third month of the tax’s implementation.
The companies, FMM said, would have still been experiencing a lack of clarity and understanding of the new tax regime and the classification and treatment of taxable items.
FMM said Putrajaya had informed it of its commitment to address technical implementation issues, reduce costs through tax deductions and further expand the exemption list to include raw materials and components used in manufacturing non-taxable goods to avoid increases in cost of doing business.
“The FMM acknowledges that the SST has addressed some of the financial and administrative burdens for manufacturers which were associated with the GST implementation previously.
“With SST, cash flow will improve as businesses do not need to pay input tax upfront but instead can apply for sales tax exemption on their raw materials, components and packaging.”
It added that the SST also had a lower compliance and administrative burden and this would help reduce costs, and noted that only 80,000 companies were subject to SST compared with the 470,000 under the GST.
“FMM has agreed with the Customs Department to fully investigate concerns highlighted by our members to address critical areas and, where possible, take action to relieve or lessen cost impacts and implementation challenges.
Previously, Finance Minister Lim Guan Eng said FMM’s claims of business costs escalating as a result of the SST should be investigated.