The Malaysian Timber Association (MTA) is calling for immediate Government intervention as the wood-based sector confronts a mounting “triple burden” the expansion of the Sales and Service Tax (SST), surging diesel prices, and critical foreign worker shortages.

Its President Tan Peng Juan said the timber and furniture sector, as one of Malaysia’s key export-driven industries, plays a vital role in the national economy supporting thousands of SMEs, sustaining extensive rural and industrial employment, and generating billions in export earnings annually.

He said Malaysia remains among the world’s leading furniture exporters, and any prolonged disruption to the sector risks far-reaching economic consequences, including job losses, weakened supply chains, and erosion of global market share.
Together, he added these pressures are driving up costs, constraining production, and steadily eroding Malaysia’s competitiveness in the global timber and furniture market.


“The industry is being squeezed from all sides, taxes at the source, fuel at unsustainable levels, and labour shortages that are crippling production.

“This is not just an industry issue it is an economic one. Without urgent intervention, we risk losing not just margins, but Malaysia’s position as a leading global furniture exporter,” Tan who is also Sabah Timber Industry Association (STIA) President said here, recently.

He said the expansion of SST in July 2025 has removed the long-standing tax exemption for sawn timber (HS Code 4407), triggering cost increases across the entire value chain.

Unlike the previous Good and Services Tax (GST) regime, he said the SST does not allow input tax credits resulting in embedded, compounding taxes at multiple production stages.

He said sawn timber is now subject to a 5% Sales Tax as a “raw material for registered manufacturers,” driving an estimated 8-12% increase in downstream production costs and creating a tax-on-tax effect from mill to finished product.

“Why it matters? Because taxing at the raw material stage locks up cash flow, raises working capital requirements, and inflates the final price of value-added exports such as furniture, placing Malaysian products at a clear disadvantage against regional competitors.

“Hence, we in MTA, a national coalition of timber organisations from the Peninsular, Sabah and Sarawak, urges the Ministry of Finance to reinstate full tax exemption for sawn timber and formally recognise it as a raw material for construction materials, to eliminate cascading costs and restore export competitiveness,” Tan said.

On the volatility of diesel pricing, he said surging industrial diesel prices are pushing the timber supply chain to the brink.
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Source: dailyexpress.com.my