Kuala lumpur: The Federation of Malaysian Manufacturing (FMM) recommends exempting small and medium enterprise (SME) manufacturers of taxable goods from paying Sales and Service Tax (SST) on input services such as rentals and logistics, to prevent compounding tax-on-tax effects that drive up costs.

According to BERNAMA News Agency, FMM's president, Jacob Lee, highlighted that relief from service tax and targeted sales tax exemptions would provide crucial support for SMEs to manage cash flow, reinvest in productivity improvements, and sustain business operations. He praised the waiver of service tax on rental services for SMEs with annual turnovers up to RM1.5 million, along with the reduction of the service tax rate to 6.0 per cent.

Lee emphasized that the upward revision of the service tax threshold on rental services would help alleviate cost pressures for SMEs, particularly manufacturers and supporting service providers that operate from rented premises due to limited financial capacity to purchase or build their own facilities. He noted that for many smaller businesses, rental expenses are a fixed and unavoidable cost, and relief from additional tax burdens offers essential room to manage cash flow, invest in productivity improvements, and ensure business continuity.

This move is seen as a positive step towards enhancing SME competitiveness. The announcement follows Prime Minister Datuk Seri Anwar Ibrahim's recent declaration that the Service Tax on rentals for micro, small, and medium enterprises (MSMEs) has been reduced to six per cent from eight per cent, with businesses recording annual sales of up to RM1.5 million being exempt from Service Tax on rentals.