Posted on 18 Jun 2025
Industry players in Malaysia are warning that the expansion of the sales and services tax (SST) on iron and steel products, effective 1 July, will create serious financial pressure that could threaten the survival of the sector, Kallanish notes.
The Malaysian Iron and Steel Industry Federation (MISIF) says in a statement that the abrupt implementation poses significant challenges to both the iron and steel industry and the broader economy. It opines that the timing is deeply misaligned with the current economic pressures facing the industry.
It notes the initiative, designed to ensure that non-essential goods and service sectors contribute fairly to the country's fiscal stability, risks imposing further strain on an already fragile manufacturing landscape.
According to MISIF, Malaysia’s steel industry is currently operating in a fragile and unbalanced environment. Domestic capacity utilisation remains low at about 39%, amid rising regional overcapacity. Local mills are also facing demand shortfalls, resulting in idle capacity and business closures.
The upcoming SST expansion subjects previously exempted items to tax, including coking coal and coke (5%), steel components (5%-10%), steel scrap (5%), industrial machinery (10%), and 6-8% on services like rental or leasing services.
"As the industry faces rising input costs, their margins tighten and they are either forced to raise prices or absorb losses, undermining their competitiveness. These challenges are made worse by the upcoming carbon taxes on iron and steel in 2026, along with existing global trade barriers such as the 50% US steel tariff," the association says.
It also highlights that the expanded service tax on core services will significantly raise operational costs for manufacturers, particularly those reliant on leased premises and construction services.
It notes these added costs will inevitably cascade down the supply chain, ultimately burdening consumers and negatively impacting the construction sector, a key driver of steel demand, accounting for over 63% of total domestic consumption.
"With parallel pressures like carbon tax and export tariffs, the iron and steel industry’s transformation efforts in areas such as ESG, digitalisation, and moving into higher-value markets are at serious risk," it says.
MISIF, therefore, calls the government to defer the SST expansion on iron and steel products. This is to allow for proper industry consultation, conduct a comprehensive sector impact study to identify necessary exemptions, thresholds and a phased implementation strategy and provide clear guidelines and transition support.
"These measures are vital to ensure the iron and steel industry can adapt effectively without jeopardising ongoing transformation, competitiveness, or industry resilience," it says.
Source:Kallanish
