KUALA LUMPUR, August 1 — The Malaysia Retail Chain Association (MRCA) has called on the government to defer and review its decision to impose the Sales and Service Tax (SST) on electricity, water, chilled water supply and other recoverable utilities and ancillary charges for commercial tenants who pay their utilities bills to the mall management, effective July 1, noting concerns over a potential double taxation effect and creating an unequal playing field in the retail industry.
The issue stems from the Guide on Rental or Leasing Services (Version 2) issued by the Royal Malaysian Customs Department (RMCD) on May 14, 2026. Following the guideline, MRCA members received circulars from shopping mall managements in early July stating that a 6% Service Tax would be levied on tenants’ utility bills, retroactive to July 1.
MRCA highlighted that utility expenses collected by mall operators and commercial landlords are essentially pass-through operational outlays recovered purely on a reimbursement basis.
In a statement today, the association pointed out that imposing service tax on these reimbursements leads to double taxation, as SST is already levied at the utility provider level.
“Imposing an additional service tax on commercial tenants merely inflates operating expenses without generating extra economic value or enhancing productivity. Ultimately, these compounding costs risk being passed on to consumers, indirectly driving up the overall cost of living,” MRCA said.
The association urged the government to suspend the ruling and requested an urgent engagement with officials from the Ministry of Finance and the Customs Department to work out a practical solution.
It added that retailers are already grappling with escalating overheads, including rent, labor, and management fees leaving them with virtually no margin to absorb additional tax expenses.
MRCA noted that a joint memorandum was submitted to the RMCD on June 25, 2026, by a coalition of eight major trade associations seeking a dialogue.
The eight co-signatories comprise 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), and Small and Medium Enterprises Association (SAMENTA).