PETALING JAYA: The Malaysia Singapore Coffee Shop Proprietors’ General Association (MSCSPGA) is calling on the government to align the Sales and Service Tax (SST) rate for alcoholic beverages in Budget 2027 with that for food and other beverages, and to remove the most recent excise duty increase on beer imposed in the previous Budget.
Emphasising that food and beverage (F&B) operators face higher overheads, intense competition and more cautious consumer spending, the association said the domestic F&B sector and the value chains it supports make a meaningful contribution to the national economy.
Vice-president Keu Kok Meng cited examples in Petaling Jaya where monthly shop rents had doubled since 2024, from RM6,000 to RM12,000.
Such increases on lease renewal can put considerable pressure on small businesses, even in areas where footfall remains strong, he noted.
“Behind these figures are real livelihoods. Many coffee shops are family-run operations, where owners work alongside long-serving staff who depend on the business staying open.
“When costs rise faster than income, operators are left choosing between cutting workers’ hours, reducing headcount or shutting their doors,“ he said.
The association noted that some operators in its network have already made the difficult decision to close, while others continue to trade at diminishing returns.
“A busy street does not mean every coffee shop is doing well. Customers have more choices, and their spending is spread across more businesses.
“Meanwhile, owners still have to pay rent, wages and suppliers. There is only so much they can absorb before having to review their prices,” said Keu, who is also honorary secretary of the Petaling Jaya Coffeeshop Association.
According to the 2025 Economic Impact Assessment by Confederation of Malaysian Brewers Bhd, the brewing industry alone generated an estimated annual average of RM3.3 billion in tax revenue and supported an average of 52,400 jobs annually.
These are livelihoods and government revenues that depend, in part, on a sustainable operating environment for licensed F&B businesses.
Independent retail research firm Retail Group Malaysia reported a 4.6% year-on-year decline in café and restaurant sales in the first quarter of 2026, the category’s first contraction in nearly three years.
Without relief from further cost pressures, more businesses risk closure, putting jobs and community livelihoods at stake.
For many traditional coffee shops licensed to sell beer, this caution is also being felt in beverage sales.
As customers cut back on discretionary spending, F&B operators are seeing softer beer demand, affecting an important income source that contributes to everyday business expenses such as rent, wages and utilities.
These pressures come as some F&B operators are still working to recover losses incurred during the pandemic.
According to the association, businesses saw only a short period of stronger consumer spending after restrictions eased, which was not enough to offset losses accumulated during the pandemic years.
Since then, rising rental and other operating costs have continued to weigh on businesses, leaving many with little capacity to reinvest or grow.
“When beer sales fall, F&B owners also feel the impact on their overall earnings. They still have to pay everyday expenses.
“Further duty increases will translate into higher purchase costs, leaving operators with another difficult decision: absorb the increase and earn less, or raise prices and risk losing more sales,” said Keu.
The association also raised concerns about competition from illicit beer.
It said some illicit products can be sold at prices up to 50% lower than legitimate beer, making it harder for licensed businesses that purchase through legitimate channels and comply with taxes and regulations to compete on price.
With legitimate beer demand already under pressure, the association cautioned that a wider price gap could further divert spending away from compliant outlets, undermining government tax collections and the livelihoods of workers across the legitimate supply chain.
The MSCSPGA calls for reduced excise duties alongside stronger enforcement against illicit trade to support licensed businesses and the wider legitimate distribution network.
The association also said greater tax stability would provide more certainty across the legitimate beer value chain, including distributors, suppliers and retailers connected to licensed outlets.
Reflecting these concerns, the association hopes Budget 2027 will take a more holistic approach to the pressures facing smaller businesses across the F&B value chain.
The association’s proposals include removing the last alcohol excise duty imposition, lowering the service tax rate from 8% to 6% to be in line with food and other beverages, avoiding further SST increases or scope expansion affecting F&B businesses.
Beyond taxation, the association called for future wage adjustments to be phased in with consideration for regional living costs, local trading conditions and businesses’ capacity to adapt.
“We support efforts to improve incomes and strengthen the economy. For small businesses to play their part, they need greater certainty over their costs. We hope Budget 2027 will give F&B operators room to sustain their businesses, retain workers and continue serving their communities,” said Keu.
The decisions made in Budget 2027 will have real consequences for the small businesses, workers and communities that make up Malaysia’s F&B sector.
With policy stability and effective enforcement, the F&B sector can continue to invest, employ Malaysians, and contribute to economic growth, the association said.
