Palm Oil

by SUFEA SALEHUDDIN

THE Plantation and Commodities Ministry (KPK) has directed palm oil industry players, particularly those in the oleochemical segment to engage directly with stakeholders to assess the impact of the expanded Sales and Service Tax (SST), which comes into effect on July 1.

The move follows rising concerns that the tax changes could raise operational costs for downstream producers and weaken Malaysia’s competitiveness in key export markets.

According to CIMB Securities Sdn Bhd, palm kernel oil (PKO) — previously exempted from SST — will now be subject to a 5% tax under the revised framework.

The same applies to refined, bleached and deodorised (RBD) PKO and palm kernel shells, raising the cost base for oleochemical manufacturers that process PKO into fatty acids, glycerine and other derivatives.

Speaking at the Palm Oil Transfer of Technology 2025 (TOT 2025) programme hosted by the Malaysian Palm Oil Board (MPOB) today, Minister Datuk Seri Johari Abdul Ghani said the ministry is seeking clarity on which segments of the supply chain are most affected.

“I have instructed the ministry to engage with the industry players. We want to know which part of SST affects them,” he said.

He added that any feedback must come directly from players operating within the value chain — such as mills, refineries and oleochemical producers and not from external parties.

“We cannot get the feedback from people who are not involved in the industry,” he said.

Johari said the ministry would evaluate whether the new tax structure poses risks to export competitiveness and is prepared to act if necessary.

“If those things affect our competitiveness, then we will see how to handle the case,” he added.

He also clarified that SST does not apply to the export of raw palm oil and related feedstocks, noting that some complaints may stem from misunderstandings over the tax’s scope.

While acknowledging that tax is often unpopular, Johari said a proper system remains necessary for national development — provided it does not undermine Malaysia’s position in the global market.

“In terms of the economy, there needs to be a tax system. And we need to see the effects on our competitiveness,” he said.

The oleochemical industry is a key part of Malaysia’s downstream palm oil sector. In 2023, palm-based derivative exports to China reached RM2.82 billion.

Analysts warn that SST-related cost increases could reduce Malaysia’s pricing advantage, especially amid growing competition from regional producers.

The SST revision is part of the Finance Ministry’s broader 2024 tax reform, which expands the taxable scope across over 4,800 Harmonised System (HS) Codes. Industry observers have warned that the added burden may pressure downstream operators and consumers, particularly in non-essential product categories.