What Malaysia's SST expansion means for marketers

Malaysia’s revised sales and service tax (SST) will take effect on 1 July 2025 to boost revenue and broaden the tax base, the Ministry of Finance (MOF) announced. First revealed in Budget 2025, the update follows consultations with industry stakeholders.

Sales tax will remain at 0% for essentials such as groceries, medical devices, books, pet food, key construction materials, and agricultural tools. However, a 5% tax will apply to selected non-essentials like salmon, imported fruits, essential oils and industrial machinery, while premium discretionary items such as racing bicycles and antique artwork will face a 10% tax.

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The service tax will expand to cover sectors including leasing, construction, finance, healthcare, education, and beauty, with exemptions in place to avoid tax layering and protect essential services.

Yet, as with most tax policy shifts, the ripple effects extend beyond compliance or accounting, particularly for marketers and brand owners.

The ripple effect

Since the MOF’s announcement, industry groups have raised concerns. The Association of Private Hospitals Malaysia has urged the government to delay the rollout, warning of disruptions to patient services. Similarly, the Small and Medium Enterprises Association of Malaysia (SAMENTA) has called for higher SST thresholds or exemptions for MSMEs, citing financial pressures.

CIMB Securities, quoted in The Edge Malaysia, noted that broader SST coverage could lead to weaker discretionary spending, with higher prices affecting non-essential goods and a wide swathe of services. For the marketing and retail industry, this means more than just cost recalculations, it could affect how brands promote, operate, and engage consumers.

In conversation with A+M, a marketer speaking on the basis anonymity, explained that the impact could be significant. “Adding in SST for rental will mean that retailers will observe an increase in rental cost for stores and outlets. Multiply that across 700 to 800 outlets and suddenly, your costs will have increased exponentially,” they said.

This, in turn, has direct consequences on marketing and promotional efforts. “This means lesser budget overall, and marketing will be no exception. There will be pressures to shift costs to increased prices, and higher cost to serve will flow down towards rethinking how we carry out promotions,” they added.

They also noted that marketers will need to recalibrate gross profits. “As every promo you run still needs to bring in enough incremental to cover your loss in gross profits.”

Can marketing ease concerns?

While the MOF insists that essential services will remain tax-exempt, the broader net of the new SST means marketers may need to adopt more data-driven, cost-efficient strategies, especially in retail and FMCG sectors. With operating costs rising, businesses will likely focus on margin protection, targeted promotions, and leaner media spend.

Meanwhile, IPC's deputy general manager Mark Tan said, with the expansion of the SST, customers are likely to become more cautious in their spending, as overall costs will rise due to hidden increases within the supply chain that aren’t immediately visible to them. "This presents a critical challenge for marketers. How do we retain customer and prevent them from turning to alternatives?" said Tan. 

The answer lies in empathetic pricing communication. It’s essential to explain price adjustments transparently, while continually reinforcing the value of your product or service.

He noted that customers need to feel that what they're paying for is still worth it. "However, striking that balance is no easy feat, as effectively communicating price increases is a challenge in itself in this economy," he added. 

As the industry prepares for the 1 July 2025 rollout, marketers across sectors may find themselves navigating more than just pricing adjustments. They’ll need to rethink how they engage consumers, stretch every ringgit, and justify every campaign.

Brand building to take a backseat

With the expanded SST set to raise operating costs, marketers are also bracing for tighter budgets and shifting priorities. As cost pressures mount, many may be forced to deprioritise brand building in favour of short-term, conversion-driven strategies.

Kenny Wong, seasoned marketer and former CMO at UEM Sunrise said that the impact of the expanded SST will basically increase costs to doing business, but only certain non-essential aspects are directly hit. "Effectively, individuals and companies will feel that costs have gone up and whilst they might complain about it (as Malaysians always do anyway), life will go on and they will continue spending, albeit a bit more cautiously and selectively at first, until a ‘new normal’ sets in," he added.

According to Wong, new benchmarking will take place for companies, especially advertisers and marketers. "This means adjusting prioritisation, deployment strategies and audience redefinition, to focus on the lower end of the funnel and more emphasis on transactional media to improve conversion," he said.

For a large number of marketers this will mean that brand building takes a back seat.

"And the age-old dilemma of assessing whether to continue investing in advertising or channel the budgets into incentivising consumers via trade or retail promotions will happen," added Wong. He also said that for the next six months into the year post-implementation, a form of correction will take place. And by the same time next year, Wong expects to see a new, normalised index with the initial impact taken into account.

Riding out the 'perfect storm'

Meanwhile for the anonymous marketer, this new SST expansion doesn't pose as too much of a blow. "Everything is interconnected and there will be a knock-on effect for every change made. Usually, the ones who are at a disadvantage will be the people who are unable to pass on the cost," they said. "However, the nature of marketing has always been complicated every challenge is slightly different that we need to figure out creative ways to navigate around," they added. 

"As painful as challenges are, as humans we do our best work when we are forced out of our comfort zones. We will find the most innovative solutions when forced to do so. It will be interesting to see how we as marketers breakthrough despite the discomfort.”

The expanded SST isn’t the only challenge marketers will face in the coming months. With additional cost pressures looming from the potential removal of petrol subsidies to new stamp duties on employment contracts and adjustments to LPG subsidies, consumer expenses are expected to rise significantly across the board.

“This is shaping up to be a perfect storm,” said Kenny Wong, who stressed the need for laser-focused marketing objectives in a tightening economy. For marketers, this means making tough choices. Trade-offs between short-term sales activation and long-term brand building will be inevitable. “You’ll be hard-pressed to have it all,” he added.

Agencies, too, will face more demanding clients — those with less budget but higher expectations, said Wong.

Yet, as with past disruptions, those who adapt quickly and accept that some compromises must be made will emerge stronger.

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