Malaysian sales tax on low-value goods can be a boon or bane

Industry insiders say that while the tax might reduce demand for imported goods, those relying heavily on imports may face higher costs, leading to reduced profits or business closure.


December 21, 2023

PETALING JAYA – The upcoming 10% sales tax on imported low-value goods could pose potential challenges for ecommerce businesses and micro, small and medium enterprises (MSMEs), say SME groups.

SME Association of Sabah (SME Sabah) president Datuk Foo Ngee Kee said ecommerce companies might face higher costs as they now have to collect and pay the sales tax on behalf of their customers.

“This added expense could make it more expensive for them to operate in Malaysia, potentially reducing competitiveness and causing closures, especially for one-person micro-SMEs. MSMEs that tend to buy low-value imported goods due to lower incomes may see a reduction in (business),” he said when contacted.

Foo said MSMEs may need help to compete due to the increased cost from the sales tax, which would affect their profitability and overall competitiveness.

While it might help local MSMEs by reducing demand for imported goods, those relying heavily on imports may face higher costs, leading to reduced profits or business closure.

Sabah MSMEs may need help due to location and increased transport costs from the sales tax, he added. However, Foo acknowledged that if equivalent local products exist, implementing the 10% sales tax on imported low-value goods can help boost local MSMEs by making imported goods less attractive to consumers.

“This can lead to increased demand for locally-produced goods and services, which benefits MSMEs. However, some MSMEs may face higher costs due to the sales tax, particularly those that rely heavily on imported raw materials,” he said.

“Many packing materials are imported, which will be subject to the new stamp duty. This could lead to reduced profitability or even closure in some cases.”

Malaysia Cross Border e-Commerce Association president Eng Kin Hoong said the 10% sales tax on imported low-value goods would benefit local merchants and foster competition with foreign merchants on pricing, potentially attracting more foreign manufacturers to establish themselves in Malaysia.

Still, the cost of establishing a presence in Malaysia, including corporate taxes and related expenses, proves to be a deterrent, he added.Eng admitted that local merchants might not have as diverse a range of products as sellers of foreign goods, and the 10% tax can attract foreign businesses into Malaysia.

Alternatively, foreign manufacturers may seek partnerships in Malaysia that would benefit local merchants, he said.

Eng called on the government to provide sellers with a grace period. By handling violations leniently and allowing for a grace period, businesses and consumers can better adapt, he said.

Eng urged the government not to focus on increasing national revenue alone, but also on utilising the tax proceeds to assist SMEs and local merchants in expanding their business.

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