The Royal Malaysian Customs Department has issued a statement clarifying reports on cars being exempt from sales tax (SST). The goods that are exempt from SST are components for CKD assembly, and not the CKD cars themselves. The finished product, which is the car, is liable for SST.

“Customs would like to explain that passenger cars have always been in the plan for sales tax. However, some parties have misinterpreted the list (list of SST exempted goods that was released today) that was released without referring to Customs,” said director-general Datuk Seri Datuk Subromaniam Tholasy.

“Items that are exempted from sales tax in the list refers to components that are used for the assembly of completely knocked down (CKD) passenger cars. When the vehicle made from the imported CKD components is finished, the finished vehicle is liable to sales tax. With this explanation, Customs hope that the issue is closed and does not confuse the rakyat and consumers,” Subromaniam added.

The clarification by the Customs follows reports that cars will be exempt from SST once the new tax system kicks in from September 1, first reported by Malaysiakini. Now, with the matter clarified, it’s likely that we will see higher car prices come September 1, after factoring in SST, as expected.

However, the SST rate is yet to be finalised. Yesterday, finance minister Lim Guan Eng said that there will also be two different rates of 5% and 10% for sales tax, which is applicable to selected manufactured and imported products. He added that details will be announced when the new SST Bill is tabled in parliament next month.