Higher prices for tobacco products and alcohol will persist with SST

PETALING JAYA: Higher prices will persist following the implementation of the Sales and Service Tax (SST), particularly for tobacco products and alcohol, whereby importers and manufacturers have planned to pass the tax down to consumers.

Sin stocks British American Tobacco (M) Bhd, Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd have implemented an industry-wide price increase as they traditionally do not absorb value-added taxes.

While these companies also struggle to combat the unrelenting illicit trade market, brewers may see additional pressures from a potential slowdown in demand from their on-trade segment, which is exposed to the 6% service tax, Kenanga Research said.

It added that high tobacco prices would also affect convenience store operators which owe a high proportion of revenue to tobacco sales.

The research house said the food service industry may also resort to higher prices from the service tax imposed to customers.

“Note that certain establishments may impose percentile service charges, which are separate from the above tax.

“As for retail shopping, certain operators and brands run business models with a high imported product mix and may see a higher tax exposure from the 10% sales tax given their less complex supply chain,” it said in a report.

Customers of these outlets may notice some difference in pricing owing to this if the companies choose not to absorb the taxed amount.

It expects retailers such as Aeon to see consumer demand being stimulated from the perceived lower prices.

“This could boost other expansionary initiatives such as strategic location openings and expanding their e-commerce presence,” it said.

While Parkson could also potentially see better domestic results, group level earnings could still be undermined by their regional footprints, which are seeing less favourable returns.

On the other hand, net importers such as Amway (M) Holdings Bhd and Padini Holdings Bhd could see lower demand from the higher prices caused by higher tax costs, it added.