KUALA LUMPUR (April 29): Malaysia will miss the opportunity to collect RM730 million in the month of May after the government postponed the sales and service tax (SST) scope expansion, BIMB Securities said.
This, coupled with a lower global oil price forecast, is expected to dampen the federal government’s revenue target of RM339.7 billion for 2025, said the research house, which estimates the collection to be lower at RM336.9 billion for the year.
“This assumes other income factors remain unchanged,” BIMB Securities said in a thematic note on Tuesday.
On a positive note, the SST expansion delay may provide a short-term boost to consumer spending in May, the firm said.
The government had previously estimated that the SST expansion would generate an additional RM5 billion in revenue, assuming a rollout in May 2025. However, its implementation, initially set for May 1, has been delayed to an unspecified date, with gazettement rescheduled to June 1.
The plan includes raising the sales tax on non-essential goods such as imported premium items like salmon and avocados. The service tax will also be broadened to cover business-to-business transactions, particularly fee-based services that were previously exempted.
Oil prices fall more concerning
More concerning for the government than the delayed SST expansion, said BIMB Securities, are falling global oil prices, as every US dollar drop will lower Malaysia’s fiscal revenue by RM300 million to RM350 million based on various estimates.
However, the lower oil prices would reduce operating expenditure as the fuel subsidy bill would shrink at a time when the government is planning to roll out targeted RON96 subsidies in 2H2025.
"Instead of RM12 billion for 85% of the population, the government will only spend RM7.5 billion for the targeted RON95 fuel subsidy,” it said.
With both the SST expansion delay and falling oil prices, BIMB expects the fiscal deficit to improve slightly to 3.76%, compared to the government’s original target of 3.8%, it added.
The research house revised its Brent crude oil forecast down to US$68 (RM294.27) per barrel on the back of a weaker global economic outlook, compared to the government’s projection of US$75–US$80 per barrel under Budget 2025.
If RON95 is fully floated by July, its market price would be around RM2.54 per litre, it said.