KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
Malaysia’s Deputy Finance Minister Lim Hui Ying announced that the expanded scope of the service tax will be revealed early next year, ahead of its implementation on May 1, 2025. The announcement comes as part of efforts to enhance revenue generation under the Budget 2025 framework.
Details of the Expanded Service Tax Scope
- Targeted Services: The revised scope will include certain commercial services, particularly those operating on fee-based models.
- Stakeholder Engagements: The final list of affected services will be shaped by ongoing consultations between the Finance Ministry and industry stakeholders.
- Revenue Impact: The government anticipates the expansion to generate an additional RM5 billion in revenue annually.
Current Tax Rates and Changes
- Service Tax: Imposed at 8% ad valorem for most taxable and digital services, with select sectors such as logistics, food and beverage, telecommunications, and parking taxed at 6%.
- Sales Tax: Currently levied at 10%, it will be extended to cover non-essential goods, particularly premium imported items like salmon and avocados, starting May 2025.
No Plans for GST Reinstatement
Lim clarified that the government has no intention of reintroducing the Goods and Services Tax (GST), focusing instead on enhancing the existing Sales and Service Tax (SST) framework.
“The SST, which has been in place for over 40 years, is easier to understand compared to GST, which requires significant preparation for both the government and industry,” Lim said during the Dewan Rakyat session.
Legislative Developments
The expanded service tax forms part of broader legislative amendments:
- Measures for the Collection, Administration, and Enforcement of Tax Bill 2024: Passed in the Dewan Rakyat via majority vote, covering updates to various tax-related laws, including the Income Tax Act 1967, Sales Tax Act 2018, and Service Tax Act 2018.
- Finance Bill 2024: Also approved, introducing amendments to laws such as the Real Property Gains Tax Act 1976, Petroleum (Income Tax) Act 1967, and others.
Economic Context
Prime Minister Datuk Seri Anwar Ibrahim’s Budget 2025 announcement highlighted the need for increased revenue to sustain national development while avoiding the reimplementation of GST, which had faced criticism for its broad-based impact on consumers.
The expanded SST is part of the government’s strategy to address fiscal needs while maintaining public and industry support.
Implementation Timeline:
- Service Tax Expansion Announcement: Early 2025.
- New Tax Scope Effective Date: May 1, 2025.
The forthcoming changes underscore the government’s commitment to modernizing Malaysia’s tax system while supporting economic growth and fiscal sustainability.
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