KUALA LUMPUR, 1 AUGUST 2026 – Retail association urges the Government to defer the expanded Service Tax on utilities, warning of higher operating costs, an uneven business environment and increased prices for consumers
The Malaysia Retail Chain Association (MRCA) has urged the Government to defer and review the implementation of the Sales and Service Tax (SST) on commercial utility bills, warning that the measure could result in double taxation, increase business costs and ultimately place additional financial pressure on consumers.
The association is seeking urgent discussions with the Ministry of Finance and the Royal Malaysian Customs Department (RMCD) to find a practical solution before the policy has a wider impact on Malaysia’s retail sector.
New SST Ruling Raises Industry Concerns
The issue follows the release of the Guide on Rental or Leasing Services (Version 2) by the RMCD on 14 May 2026.
Following the guideline, MRCA members received notifications from shopping mall managements in early July informing tenants that a 6 per cent Service Tax would be imposed on electricity, water, chilled water supply and other recoverable utilities and ancillary charges, with the tax taking effect retroactively from 1 July 2026.
The new ruling applies to commercial tenants who pay their utility charges through shopping mall management rather than directly to utility providers.
Concerns Over Double Taxation
MRCA argued that utility expenses collected by shopping mall operators and commercial landlords are merely pass-through operational costs recovered on behalf of tenants.
According to the association, these charges are reimbursements rather than additional services, making the imposition of Service Tax on the recovered amounts a form of double taxation, as SST has already been charged by the utility providers.
The association warned that applying another layer of Service Tax on these reimbursements increases operating costs without creating additional economic value or improving productivity.
MRCA also cautioned that businesses may ultimately have little choice but to pass these higher costs on to consumers, potentially contributing to a higher cost of living.
Retailers Face Mounting Cost Pressures
The association noted that retailers are already operating in a challenging environment marked by rising business expenses.
In addition to increasing rental costs, businesses continue to manage higher labour expenses, management fees and other operational overheads, leaving limited room to absorb further tax-related costs.
MRCA believes the additional Service Tax on utilities could create an uneven playing field within the retail industry, particularly for businesses operating in shopping malls where utilities are billed through management companies.
Industry Calls for Government Engagement
In response to the new tax implementation, MRCA has called on the Government to suspend the ruling while consultations are carried out with industry stakeholders.
The association is seeking an urgent engagement with officials from the Ministry of Finance and the Royal Malaysian Customs Department to review the policy and develop a more practical approach that balances tax administration with business sustainability.
Eight Business Associations Unite on the Issue
MRCA revealed that a joint memorandum was submitted to the Royal Malaysian Customs Department on 25 June 2026 by a coalition of eight major trade associations requesting formal dialogue on the matter.
The memorandum was jointly submitted by the:
- BBKLCC Tourism Association
- Building Management Association of Malaysia (BMAM)
- Bumiputra Retailers Organisation (BRO)
- Malaysia Retailers Association (MRA)
- Malaysia Retail Chain Association (MRCA)
- Malaysian REIT Managers Association (MRMA)
- Malaysia Shopping Malls Association (PPK)
- Small and Medium Enterprises Association (SAMENTA)
The coalition hopes discussions with the relevant authorities will lead to a review of the implementation, ensuring Malaysia’s retail sector remains competitive while avoiding unnecessary cost burdens on businesses and consumers alike.
