KUALA LUMPUR (July 20): The sales and services tax (SST), which is slated to make a comeback on Sept 1, 2018, will more so benefit households, while businesses selectively benefit from lower compliance costs and boost to consumer demand, according to CIMB IB Research.

"Households are the clear winners in this trade-off, receiving RM23 billion in disposable income through reduced tax collection," CIMB said in a research note today.

The new SST bill will be tabled soon and is expected to be passed before the end of the current parliamentary session in mid-August. It proposes rates of 5% and 10% for the sales tax, and 6% for the service tax — similar to the previous SST regime that was retired after 2015.

Taxable goods and services will also shrink from 60% of consumer price index (CPI) basket under goods and services tax (GST) to 38%, curtailing the inflationary impact to consumers.

"We reiterate our gross domestic product (GDP) growth (+5.2% in 2018) and inflation forecasts (+1.3% in 2018), which had already been adjusted to reflect the reinstatement of SST 2.0," said the research house.

On the other hand, CIMB noted that government finances remain a concern as the replacement of the GST with SST 2.0 entails a revenue shortfall of RM23 billion (circa 1.6% of GDP).

"While higher oil-related revenues provide a fortuitous temporary buffer, maintaining fiscal discipline hinges on the new government's ability to rapidly rationalise unproductive expenditures and reduce revenue leakages.

"Alongside these fiscal reforms, we believe a comprehensive tax reform over the medium term, which helps simplify tax structures and broaden the tax base, is equally critical to ensuring fiscal and debt sustainability," said CIMB.