KUALA LUMPUR: The sales and service tax (SST) exemption, which has been extended for the automotive sector until end-December 2021, is a strong catalyst to combat disruptions to production and sales during the Movement Control Order (MCO) and amid global chip shortage.
Maybank IB Research said the decision has a positive impact on the local automotive sector, though it was not entirely surprised by the move to extend the sales tax incentives.
"The sales tax on passenger cars will remain as zero per cent for completely knocked-down (CKD) models and secondly five per cent for completely built-up (CBU) models and/or imported cars.
"This is the second extension mooted (first extension in December 2020) and represents 18 months of a SST holiday since June 2020," it said in a note today.
In presenting the Pemerkasa+ aid package yesterday, Prime Minister Tan Sri Muhyiddin Yassin announced sales tax exemption for CKD and CBU passenger vehicles is extended from June 30 until Dec 31.
The research house said the move would help absorb much of the sales and production disruptions, especially in June 2021, which would likely mirror the poor performance in April 2020 due to the multiple lock-downs/ MCOs and global chips shortage during this period.
