Post by : Meena Ariff

Photo: Reuters

The government plans to collect an extra RM5 billion in revenue during the second half of this year, 2025. This is because of the expansion of the Sales and Service Tax (SST), which started this month.

In a written reply to a question in Parliament, the Ministry of Finance said it expects the SST to bring in double the money in 2026. The revenue from SST is expected to reach RM10 billion in 2026, which will be the first full year after the new expanded tax system is fully implemented.

A Member of Parliament had asked if the government could delay the SST expansion. He was worried about the global economic situation, especially after the tariffs introduced by the President of the United States. He also asked for a breakdown of how much tax was paid by citizens and how much by foreigners.

Government Needs Money For Public Programs

The Ministry of Finance said that it understands people are worried about rising costs. However, the government needs to make sure it has enough money to pay for public programs and national development.

The ministry explained that if it delays the SST expansion, it would mean the government will not meet its revenue target. This would then affect the country’s financial position and reduce its ability to take care of the people.

They said, “If we postpone the SST expansion, the revenue target will not be met, and it will affect the government’s responsibility towards the people.”

No Data On Citizens Vs Foreigners Tax Payments

The ministry also said that it cannot provide a breakdown of tax payments made by citizens and foreigners. This is because the current tax collection system does not record who is paying the tax based on their citizenship.

They explained that only in July did the government start including foreigners under SST for private education and healthcare services. This is why there is no detailed data yet on how much citizens and foreigners pay separately.

Help For Small Businesses

Many small business owners were worried about the SST expansion. To address their concerns, the ministry said that micro, small, and medium enterprises (MSMEs) with annual sales below RM1 million will not have to pay the service tax on rental services.

This means that very small businesses will be protected from the added tax costs.

For construction companies, the ministry raised the threshold for tax payments. Before this, construction companies with annual revenue above RM500,000 had to pay SST. Now, only those earning above RM1.5 million will need to pay the tax. This will help small construction service providers save money and continue their work smoothly.

Healthcare Providers Also Get Exemption

The ministry also announced that small healthcare providers, such as private clinics, will have a similar exemption threshold. This means private clinics with small incomes will not have to pay the tax. This decision was made to reduce their operating costs and make it easier for them to follow the tax rules.

Why The Government Needs More Revenue

The ministry explained that the extra money collected from the expanded SST will be used to fund the government’s growing expenses in 2025.

For example, the government plans to spend RM13 billion on cash aid schemes for people in need. It will also spend RM64 billion on education to improve schools, colleges, and universities for students across the country. Additionally, RM45 billion will be spent on healthcare to provide better medical services and facilities for everyone.

• The government plans to collect RM5 billion extra from SST in the second half of 2025.
• In 2026, SST revenue is expected to double to RM10 billion.
• The tax collection system does not record whether taxes are paid by citizens or foreigners.
• Micro, small, and medium enterprises earning below RM1 million will be exempt from SST on rental services.
• Construction companies now have a higher threshold of RM1.5 million before SST applies, up from RM500,000.
• Small private clinics will also have exemptions to reduce their costs.
• The extra SST revenue will help fund RM13 billion in cash aid, RM64 billion for education, and RM45 billion for healthcare in 2025.

The government says that while it understands the worries of the people about rising costs, it is important to collect enough money to continue running the country properly. They believe that the expanded SST will help them do this without putting too much burden on small businesses and healthcare providers.

The new tax rules aim to ensure that Malaysia has enough funds to support its citizens, improve education, and provide better healthcare facilities for everyone in the coming years.