The Economic Consequences of SST 3.0: A Focus on GDP and Prices

SST 3.0, Malaysia's expanded Sales and Services Tax, will take effect on 1 July 2025 to boost government revenue while keeping inflation manageable. It introduces 10 new taxable service categories and higher tax rates on luxury and non-essential goods, with essentials like food and healthcare remaining at 6% or exempt. The reform is expected to generate RM5 billion in 2025, contributing to fiscal consolidation targets. While a temporary inflation rise is anticipated, the overall GDP growth forecast remains at 4.2%. SST 3.0 is seen as a targeted, prudent step toward strengthening fiscal sustainability without hurting lower-income groups.

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