Including logistics services in SST hike will raise consumer prices - MCA

The inclusion of logistics services in the new rate for the service tax will have a compounding impact on consumer prices, said MCA vice-president Tan Teik Cheng.

The entire process of goods emerging to consumers requires logistics services and the final cost will be passed on to consumers, he said in a statement today.

He criticised Transport Minister Anthony Loke for waiting five months since the tabling of the Budget 2024 to bring the matter up at this week’s cabinet meeting, saying that Loke could have brought it up anytime.

“In the same vein, Loke should also request the Finance Ministry to exempt the logistics services from a Sales and Service Tax (SST) spike, as this ascent will result in a domino effect and affect all aspects of costing,” he said.

The service tax was increased to eight percent from the previous six percent effective March 1. However, this new rate does not include services for food and beverages, telecommunications, and parking.

Previously, the government also introduced a 10 percent Low-Value Goods Tax for online sales (e-commerce), an eight percent Digital Services Tax, as well as a Capital Gains Tax at 10 percent.

The government will also introduce a High-Value Goods Tax from May 1 as high as 10 percent.

These measures are part of the government’s efforts to improve the country’s financial resilience while reducing its budget deficit.

‘Businesses are not charities’

Tan said the government should refrain from simultaneously introducing a higher SST and instructing businesses to absorb the costs.

Ex-finance minister Lim Guan Eng

“Unlike the Goods and Services Tax, the SST does not have a tax rebate mechanism.

“Businesses are not charities. Once the costs cannot be passed on to consumers, no business will be willing to conduct any loss-making operation.

“Ultimately, any existing difficulties in the business conditions will only be exacerbated,” he said.

Earlier today, former finance minister Lim Guan Eng called on the government to review the SST, saying it can be reintroduced when the economy recovers. - Mkini