KUALA LUMPUR (Oct 18): The government’s proposal to increase the service tax to 8% from the current 6%, accompanied by its widened scope to include logistics services in particular, will burden consumers with increased cost of goods, according to Members of Parliament on both sides of the aisle.

Bagan MP Lim Guan Eng, a former finance minister, said the inclusion of the logistics services will result in an increase in cost of goods and only raise the cost of living to be borne by the rakyat.

He also said the two percentage point increase in the service tax, with an expansion of scope to cover logistics, brokerages, and karaoke services, has raised concerns among industry players.

“Therefore, I hope this matter can be considered for this (the tax increase and widened scope) to be delayed because when we talk about logistics, it will have a big impact,” he said during the debate session on Budget 2024 in Dewan Rakyat on Wednesday (Oct 18).

However, Lim said that if the government chooses to continue with its plans for the service tax, he hopes it will then consider a lower rate for the goods and services tax (GST) when intends to reintroduce the consumption-based tax.

The concern over the service tax being imposed on logistics services was also echoed on the opposition side by Pagoh MP Tan Sri Muhyiddin Yassin.

Muhyiddin reasoned that since the Malaysian economy operates via an interconnected supply chain, the two percentage point tax increase as well as widened scope will affect other services, increasing the cost of production of goods and services that will ultimately be borne by consumers.

“This means, this tax increase will definitely increase the rakyat’s burden,” he stressed.

Under Budget 2024, the government announced that it plans to raise the sales and service tax (SST) to 8%, with a widened scope to include logistics services, brokerage and underwriting, as well as karaoke, as part of efforts to increase revenue.

Prime Minister Datuk Seri Anwar Ibrahim, in tabling the government’s annual expenditure plan, specified that the tax increase will not be imposed on food and beverages and telecommunications services, with the aim of not raising the burden on the rakyat.

On the government’s other proposed tax measures, Lim also warned that the 10% capital gains tax (CGT) on non-listed shares raises concerns that it will be expanded to cover public-listed shares in the future.

Meanwhile, Muhyiddin asked the government to provide a projection as to how much the CGT and high value (luxury) goods tax at 5% to 10% are expected to contribute to the government’s revenue.

Previously, Treasury secretary general Datuk Johan Mahmood Merican said the government expects to collect an additional RM3 billion in revenue via the two percentage point increase in SST.

According to the federal government’s 2024 Fiscal Outlook and Revenue Estimates report, the government is expected to collect RM16.6 billion in revenue from SST in 2023.

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