The Federation of Malaysian Manufacturers expected a softer second half of 2025 as manufacturers faced rising costs and weak demand. Bernama reported on 17 September that president Soh Thian Lai linked the outlook to expanded sales and service tax, US tariffs and industrial electricity costs in Malaysia.
Survey period and the production-cost index
The federation’s dated first-half survey report identifies fieldwork from 2 July to 15 August and 627 responses. Small and medium businesses represented 71% of respondents by the employee-count definition. Klang Valley supplied 150 responses, Perak 107 and Penang 72.
Bernama records a production-cost index of 158, up from 144, with about two-thirds of firms reporting higher costs.
The tax changes announced before the survey
The Finance Ministry’s 9 June announcement scheduled targeted sales-tax revisions and a wider service-tax scope for 1 July. It described exemptions intended to limit cascading taxation. For companies taking steps to comply, the ministry announced no prosecution or penalties through 31 December 2025.
Following feedback, the ministry revised parts of the package on 27 June. The registration threshold for leasing or rental and fee-based financial services rose from RM500,000 to RM1 million. The statement also raised the annual-sales threshold relevant to businesses paying tax on rental services.
- Imported apples, oranges, mandarins and dates were exempted from sales tax.
- The proposed service-tax expansion to beauty services was withdrawn.
- The amendments were scheduled to take effect on 1 July.
What manufacturers wanted clarified
At the September survey briefing, FMM identified product classification, mixed supplies and unused input exemptions as operational difficulties.
