The Continuation of SST Exemption & Its Effect on The Economy - What Do Economists Say? Here's Their Answer!

Believe it or not, there are still two months left for Malaysians to enjoy the SST Sales and Service Tax Exemption incentive on the purchase of local vehicle products or imported sedans.

As you know, the price of cars with SST will expire in June.

Yet what remains a puzzle is whether the car’s SST exemption will be extended or revoked?

So far, the government is still tight -lipped, refusing to announce any car SST status even though it has two months left.

To that end, Caricarz seeks the views of economists what is the impact on the economy if car SST is continued?

Here's the Answer!

Economists described that if the car sales tax (SST) exemption is continued, the nation's income will continue to be affected.

This is due to the country's economy which not yet fully recovered.

Follow Caricarz's interview with Bank Islam Malaysia Bhd's Chief Economist, Dr Mohd Afzanizam Abdul Rashid and Senior Lecturer, Department of Social Sciences and Management, Faculty of Humanities, Management and Science, Universiti Putra Malaysia (UPM) Bintulu Campus, Sarawak, Shairil Izwan Taasim.

What is the opinion of Dr. about the country's current economic growth?

The country's economy has not fully recovered although Malaysia's Gross Domestic Product (GDP) is expected to continue to improve by growing between 5.3 and 6.3 per cent this year.

Should car SST be extended again?

If the car SST is extended, it will actually have a positive impact especially on the automotive industry players.

Ranging from the manufacturing chain, insurance financing to the suppliers of spare parts components, all parties involved are reaping their respective profits.

This will lead to a stronger recovery of the private sector and supported by the improvement of the labor market or labor force will be the main driver of growth in 2022.

In fact, the unemployment rate is expected to drop to 4.0 percent.

As economic activity increases, the unemployment rate is expected to decline further in 2022 to about 4.0 percent of the labor force.

In addition, with the advent of SST, car sales will continue to soar and it will continue to provide huge profits to car operators.

There is a justification for continuing SST as it actually helps a lot of parties.

What are the disadvantages if SST is continued for the third time?

Undoubtedly, there are cons.

If SST is continued this time, it will affect the country's income. Everyone is aware that the country's economy has not fully recovered.

Looking at the current situation, should people buy vehicles before SST ends on June 30?

Depending on the situation. If the vehicle you own needs regular maintenance, then it is time to switch to a new vehicle.

It all depends on the needs of the individual himself.

Meanwhile, Senior Lecturer, Department of Social Sciences and Management, Faculty of Humanities, Management and Science, Universiti Putra Malaysia (UPM) Bintulu Campus, Sarawak, Shairil Izwan Taasim also agreed with Dr. Mohd Afzanizam.

He argues that:

Government revenue sources will be affected if SST continues to be extended!

As a result of the SST projection for 2022, it only recorded 11.8 percent, which is relatively low compared to 12 percent in 2020.

Although the SST exemption can increase sales revenue by adding value to the economy, the increase in the inflation rate of essential goods should now be addressed by the government first.

The government should pay attention to targeted subsidies and tax exemptions.

Does SST need to be extended or is it time to cancel?

Economic recovery has taken place in the automotive industry with various assistance from the government.

Statistical data also showed an increase in motor vehicle sales by 19.4 per cent for January 2022.

Therefore, it is appropriate that the SST exemption be revoked and the government should focus on increasing revenue by improving public services and public transport infrastructure from SST revenue.

Currently, car manufacturers are working to settle all outstanding orders, so is it appropriate for Malaysians to buy cars while SST is still available?

Within the process of transitioning to endemic, consumers need to focus on daily necessities such as foods supplies. 

Vehicle ownership is an alternative or consumer choice if the public service at the user’s place is good.

Now consumers should increase good cash flow in the recovery phase of an individual’s economy as opposed to adding a debt burden with the purchase of a vehicle.

As of now, the government is still remain silent. Will the extended period of the tax exemption be continued as expected by the vehicle manufacturing companies? 

To know more on SST concept, click here. 

So, what is your opinion, should SST be extended or cancelled?

Share your thoughts below this column!