KUALA LUMPUR: The government has extended the Sales and Services Tax (SST) exemption for passenger vehicles for six months until June 30 next year.
In a letter seen by the New Straits Times, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had agreed to the extension from January 1 until June 30, 2021 under the Penjana economic recovery plan to revitalise the economy.
The announcement reportedly superseded an earlier reply by the Finance Ministry on December 23, denying the Malaysian Automotive Association's (MAA) appeal to extend the SST exemption till June 30 next year.
The government had exempted 100 per cent SST for completely-knocked down (CKD) passenger cars, including multi-purpose vehicles and sport utility vehicles, and 50 per cent for new and used units of complete-built up (CBU) vehicles for six months until December 31 this year.
The letter dated December 29 was sent to the MAA as well as reconditioned vehicles dealers association Pekema stating that CKD passenger vehicles, including SUV and MPVs but not commercial vehicles like pick-up trucks, would continue to be exempted from paying the 10 per cent sales tax until June 30 next year.
New and reconditioned imported passenger vehicles will continue paying sales tax at only half the normal rate (five per cent) during the period.
The ministry subsequently issued a brief statement confirming the extension.
"The Finance Ministry has agreed to approve the extension of the tax exemption to ensure the momentum of the automotive industry," it said.
Industry officials contacted by the NST said the move would help players to recover from the Covid-19 fallout.
Malaysia Automotive, Robotics and IoT Institute (MARii) chief executive officer Datuk Madani Sahari said it would allow the sector to maintain positive sales performance seen at the end of 2020.
"Although the automotive sector showed stability in the third and fourth quarters of 2020, the extension provides more time for vehicle and component manufacturers to implement their recovery plans and marketing strategies, post pandemic.
Madani added that the move also allow more time for buyers to make better choices to buy new vehicles,
The extension demonstrated the importance of the automotive sector to the government and nation, a sector which had brought additional benefits via spin-offs in technology and economic activity, he said.