PETALING JAYA, Sept 3 — Alcohol and tobacco manufacturers will not absorb the 10 per cent sales tax on their products and will raise prices to comply with the new tax regime.

According to The Edge Financial Daily, Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd (Carlsberg Malaysia) announced plans to shift the burden of the Sales and Services Tax entirely to consumers.

"We expect the implementation of the SST will impact consumer spending on beer negatively, especially in on-trade exposed to double taxation from both 10 per cent sales tax on products at manufacturer level and 6 per cent service tax at retail level such as restaurants and bars with yearly revenue above RM1.5 million,” Carlsberg Malaysia managing director Lars Lehmann was quoted as saying.

He said his firm, which distributes beer brands such Carlsberg, Asahi Super Dry and Kronenbourg 1664, is raising prices by 5.5 per cent to adjust.

However, Heineken Malaysia finance director Szilard Voros believes the hike is unlikely to weigh excessively on his firm’s prospects.

"[But] it will open up a (price) gap between (legal beer and) contraband beer,” he warned.

Tobacco sellers are also following suit, with British American Tobacco (Malaysia) Bhd and JT International Bhd saying they will increase prices once they secure regulators’ approval.

BAT Malaysia managing director Erik Stoel said this was because the tax obligation was higher in the system reintroduced to replace the Goods and Services Tax: 10 per cent now versus 6 per cent under the GST.

Stoel said this left his firm no choice but to pass on the tax to buyers.

JTI Malaysia managing director Cormac O’Rourke expressed disappointment that the government chose to levy the sales tax at 10 per cent versus 5 per cent before the GST was rolled out.

"The introduction of sales tax at 10 per cent for tobacco products in Malaysia translates into a price increase for all our cigarette brands taking into account the incremental rate differential from the previous GST rates levied on cigarettes,” O’Rourke said.

Philip Morris (Malaysia) Sdn Bhd managing director Kang Tae Koo, whose firm distributes the Marlboro brand, among others, said they were still evaluating their response to the SST.

The SST regime came into effect on September 1 at a rate of 10 per cent for goods and 6 per cent for services, ending the three-month tax holiday since June 1 when the GST was zero rated ahead of its repeal.