SST on raw materials like steel scrap weakens industry competitiveness, Misif says as grace period ends

KUALA LUMPUR (Jan 19): The Malaysian Iron and Steel Industry Federation (Misif) reiterated that sales and services tax (SST) on primary steelmaking raw materials, including steel scrap, weakens the industry’s competitiveness.  A number of steel-related products were subjected to SST ranging from 5% to 10% from July 1, 2025. A compliance grace period ended last year and a January SST update offered no relief for steel products.

Taxing the inputs directly increases steelmakers' costs and weakens the competitiveness of local steel, placing further burden amid its ongoing struggle against its imported counterpart, the federation said in a statement on Monday.

“This is particularly concerning as many finished products continue to enter Malaysia duty-free under free trade agreements, while locally produced steel faces higher costs due to SST on raw materials.

“Such cost imbalances could impact employment, discourage investment in value-added manufacturing and increase reliance on imported finished steel, and run counter to national objectives of strengthening domestic supply chains and reducing import dependency,” it added.

Misif reiterated its position that primary steelmaking raw materials should not be subjected to SST to preserve the industry’s competitiveness, sustainability and resilience.

The federation also dismissed the idea of imposing 10% SST on iron ore, coking coal and coke as a trade-off for exempting steel scrap as suggested by Bagan Member of Parliament Lim Guan Eng recently. Iron ore, steel scrap, coking coal, coke and steel scrap are currently taxed at 5%.

“Such an approach would merely shift cost pressures from one segment of the industry to another, without addressing the underlying structural challenges faced by the domestic iron and steel sector,” it reasoned.

Misif said it remains supportive of the government’s efforts to strengthen fiscal sustainability but notes policies affecting core industrial inputs must be carefully calibrated to remain aligned with national industrial, decarbonisation and supply chain resilience objectives.

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