THE Ministry of Finance (MOF) has moved to clear up widespread confusion over the scope of the expanded Sales and Service Tax (SST), confirming that local fruits, cooking oil and refined sugar will not be taxed under the expanded tax framework, taking effect on 1 July 2025.
Addressing public confusion over the gazetted Sales Tax (Rate of Sales Tax) Order 2025 released recently, a MOF spokesperson clarified that the 5 per cent sales tax will only apply to imported fruits, while locally grown fruits remain exempt.
“If the fruits are imported, they will be subject to the 5 per cent sales tax. Locally grown fruits are exempt from any sales tax,” the spokesperson said.
The ministry also confirmed that certain imported staple foods—such as rice, wheat, sugar, salt and meat—will not be taxed, as they are categorised as basic essentials.
“Both locally manufactured and imported palm oil used for cooking are also exempt,” the spokesperson added.
The clarification followed concerns raised online after a gazetted list of taxable goods appeared to include local items such as bananas, papayas, durians and dried longans—despite prior government assurances that essential foods would remain exempt.
Similarly, both imported and locally manufactured palm oil used for cooking are not taxed under the new rules.
Industry Pushback
Despite reassurances on food items, key sectors continue to express concern over the broader implications of the SST expansion.
Malay Contractors Association of Malaysia President Datuk Mohd Rosdi Ab Aziz told The Star today that the new tax would place further financial strain on an already pressured construction industry.
“The SST will further put a dent in the thin profits of building contractors who are already struggling with higher operating costs,” he said, citing recent subsidy removals and wage contributions as contributing factors.
He added that higher project costs could lead to delays and even compromise quality, urging the government to phase in the tax gradually.
Oliver H.C. Wee, President of the Master Builders Association Malaysia (MBAM), also warned of serious disruption to existing construction contracts and called for the new SST to apply only to projects initiated after 1 January 2026.
“The SST will significantly strain cash flows within the construction sector. We urge the government to avoid introducing further inflationary costs,” The Star cited him saying, suggesting a temporary rate reduction from 6 per cent to 4 per cent.
Private Education Concerns
Meanwhile, the private education sector is bracing for the imposition of a 6 per cent service tax on private schools that charge more than RM60,000 in annual tuition fees.
National Association of Private Educational Institutions (NAPEI) Deputy President Dr Teh Choon Jin called for a more measured rollout, warning that the tax could affect Malaysia’s international competitiveness and disrupt enrolment trends.
“Price-sensitive international markets, particularly students from developing countries, could be disproportionately impacted,” he said.
He proposed targeted exemptions or scholarships for students in critical areas such as science, technology, AI and healthcare, as well as the establishment of a dialogue platform involving the Higher Education Ministry and MOF.
Dr Teh also noted the operational burden on schools, particularly smaller institutions, which may struggle to adjust their billing and compliance systems.
“For high-end international schools, the tax could either be absorbed by the institutions or ed on to parents, creating both financial and psychological impacts,” he added.
While the government seeks to broaden its fiscal base, calls for phased implementation and stakeholder engagement continue to mount from key sectors affected by the new SST framework. - June 11, 2025
