Rising Retail Costs Prompt Shopping Mall Association to Urge Delay in SST Expansion

(Kuala Lumpur, June 13) – The Malaysia Shopping Malls Association (PPK) today urged the government to delay the planned expansion of the Sales and Service Tax (SST), citing escalating costs and increasing competitive pressures that threaten the sustainability and confidence of the retail industry.

In a statement issued today, PPK highlighted that Malaysia’s retail sector is currently experiencing significant increases in operational expenses. These include higher electricity tariffs, property assessment rate hikes averaging around 25%, and Occupational Safety and Health (OSH) licensing fees surging by as much as 600%. Additionally, the minimum wage increase to RM1,700 per month effective from February 2025 has further intensified financial burdens on businesses. The association warned that retailers, forced either to absorb these additional costs or pass them onto consumers, would consequently exacerbate inflationary pressures and dampen consumer spending, damaging the stability and growth prospects of the retail sector.

External pressures, notably the ongoing trade disputes involving the United States, have further complicated matters by diverting excess inventory into Malaysia, thereby depressing local market prices and eroding profits for domestic retailers. Unregulated foreign e-commerce platforms, particularly from China, were also cited as contributing to unfair competition by dumping goods at significantly lower prices, making it difficult for physical retail stores to compete effectively.

PPK’s statement was in direct response to Second Finance Minister Datuk Seri Amir Hamzah’s earlier announcement that, effective July 1 this year, the government plans to expand the SST’s scope to cover additional sectors, including rental, construction, finance, private healthcare, education, and beauty services. The association strongly recommended postponing this policy until after Malaysia’s designated Tourism Year in 2026, suggesting a gradual and phased approach instead.

Specifically, the association proposed implementing an initial lower SST rate of 3%, with a gradual increase to 8% over five years. They further recommended excluding service charges related to the operation and maintenance of common mall areas from taxation. Additionally, PPK advised raising the exemption threshold for sales tax to businesses with annual turnover below RM2 million, aiming to protect small and medium-sized enterprises from economic strain.

PPK emphasized its understanding of the government’s objectives to bolster fiscal revenues but urged careful coordination with industry conditions. It called for thorough consultations with industry stakeholders to ensure policy changes do not compromise the resilience and sustainability of local businesses.

Echoing similar concerns, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) and the Federation of Malaysian Manufacturers (FMM) stressed that abrupt expansion of the SST without thorough impact assessments would lead to further operational burdens, adversely affecting the business environment. Likewise, the Master Builders Association Malaysia (MBAM) recommended applying the SST expansion only to new contracts signed from 2026 onwards to avoid placing undue pressure on existing construction projects.

Amid continuing economic uncertainties, industry associations collectively urged the government to adopt a more cautious and consultative approach, stressing that measured policy adjustments and close collaboration with businesses are essential to maintaining Malaysia’s long-term economic resilience and stability.