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Effective 1st July 2025, Malaysia is implementing a significant expansion of its Sales and Service Tax (SST) framework as part of broader fiscal reforms aimed at strengthening public finances and creating a more equitable tax system. This expansion marks a strategic shift by the government to broaden the tax base by including additional goods and services under the SST net, while maintaining exemptions for essential items.
The revised SST regime introduces new taxable categories, updates specific tax rates—ranging from 5% to 10%—and brings more service sectors such as construction, logistics, private education, beauty services, and non-citizen healthcare into the tax scope. These changes are designed to enhance revenue generation without placing undue burden on lower-income groups, as core essentials remain tax-exempt.
In this article, we outline the key highlights of the expanded SST, the revised tax rates, and the types of goods and services affected—providing a clear guide for businesses and consumers navigating the changes.
Highlights of the SST Expansion
- Effective Date: 1 July 2025 (legislation gazetted 9 June)
- Purpose: Broaden tax base, boost revenue, strengthen fiscal position while protecting core essentials
- Sales Tax Changes:
- Retains 0%, 5%, and 10% band structure.
- Imposes 5% on selected non-essential items; 10% on premium/luxury goods
- Exempt items (0%) include basic foods, essential medicines, books, agricultural inputs, and construction materials
- Service Tax Expansion:
- Includes rental/leasing, construction, financial services, private healthcare (non-citizens), education, and beauty services
- Rates: 6%–8%, depending on category, with select exemptions to avoid double taxation
- Transitional Relief:
- No penalties for non-compliance if businesses register before 31 Dec 2025
SST Rate Changes from 1 July 2025
Sales Tax
| Category | Examples | New SST Rate | Notes |
| Sales Tax – 0% (unchanged) | Fresh produce, rice, cooking oil, sugar, salt, flour, bread, milk, medicines, books, sand, cement | 0% | Covers essential foods, medicines, educational materials, construction materials |
| Sales Tax – 5% (new/additional) | King crab, salmon, cod, truffles, imported strawberries, essential oils, silk fabric | 5% | Newly taxed non-essential & discretionary goods |
| Sales Tax – 5% (unchanged) | Abalone, lobster, quinoa, cheese, fruit jams, smartphones | 5% | Previously under 5%, retained |
| Sales Tax – 10% (new/additional) | Tungsten scrap, racing bicycles, antique hand‑paintings | 10% | Newly classified as premium/luxury goods |
| Sales Tax – 10% (unchanged) | Caviar, shark fins, alcoholic drinks, cigarettes, cigars, leather products | 10% | Premium/luxury segments maintained |
Service tax
| Service Tax – Category | Scope & New Rate |
| Rental/Leasing | 8% on commercial rentals/leasing, excluding residential, book rentals, monetary leases; MSME rental < RM 500k turnover exempt; B2B relief applies |
| Construction | 6% on infrastructure, commercial & industrial works; excludes residential; threshold: > RM 1.5 m turnover; 12-month relief for non-reviewable contracts |
| Financial Services | 8% on fees or commissions; basic banking, Shariah‑compliant finance, brokerage/underwriting, FX gains, Bursa transactions exempt; threshold RM 500k |
| Private Healthcare (non-citizens) | 6% on services to non-Malaysian patients through private facilities; threshold RM 1.5 m turnover; Malaysian citizens exempt |
| Education | 6% on private preschools, primary/secondary, higher learning & language centres; fees > RM 60k/student or non-citizen students; exemptions for Malaysian citizens with OKU cards |
| Beauty Services | 8% on facials, manicures, hairstyling, make‑up, body slimming; threshold RM 500k; B2B relief applies |