KUALA LUMPUR, March 21 — Stakeholders in the maritime sector have urged the government to reassess the implementation of a 6 per cent service tax on the ship maintenance, repair, and overhaul (MRO) segment to safeguard the local marine industry.
Association of Marine Industries of Malaysia (Amim) president Adren Siow said the introduction of the service tax marks a significant shift, “primarily manifesting as an increase in operational costs within the highly competitive marine industry.”
“We understand the service tax will have a compounded effect through the supply chain supporting the marine industry. The foremost impact of the new tax regulations is an anticipated increase in operational costs across the board,” he said in a joint statement.
Siow highlighted that in response to rising operational costs, it is expected that businesses will revisit their pricing strategies as the adjustment is a necessary step to ensure the sustainability of operations, albeit leading to an increase in the cost of ship repair and maintenance services.
“Such changes will invariably affect all stakeholders within the supply chain,” he added.
Sarawak Association of Maritime Industries president Renco Yong King Hwa said Sarawak has built a robust supply chain for shipbuilding and MRO, gaining international acclaim for its high quality work and dedication to maritime excellence.
“However, the new service tax on marine MRO activities poses a challenge, potentially affecting our ability to compete on a global scale,” he added.
Similar to this viewpoint, the Sibu Shipyards Association and the Sabah and Sarawak Shipowners Association emphasised that the implementation of the new service tax might pose specific obstacles to the local and global competitiveness of Sibu’s shipyards and MRO providers.
The anticipated increase in service costs may lead shipowners, whether based locally or abroad, to consider more cost-effective alternatives in other regions, especially Indonesia.
Singapore, Indonesia, Vietnam, and Thailand have strategically implemented tax policies and incentives to strengthen their position in the global maritime MRO market.
For example, Singapore has become a leading hub by capitalising on its goods and services tax exemption for MRO-related goods and services. Similarly, Indonesia has implemented value-added tax exemptions and established the Batam-Bintan-Karimun Free Trade Zone to stimulate development in its maritime sector.
— Bernama
