The Ministry of Finance has confirmed that the expanded Sales and Service Tax (SST) will come into force on July 1. Under this revised structure, selected non-essential goods will be subject to a sales tax ranging between 5% and 10%.
The service tax scope will also be broadened to cover new sectors such as rental and leasing, construction, financial services, private healthcare, education, and beauty services, the ministry announced on Monday.
To prevent double taxation and protect essential services, specific exemptions will remain in place. These changes—part of the Budget 2025 reforms—are designed to widen the tax base and boost government revenue without significantly impacting the general public, said Finance Minister II Datuk Seri Amir Hamzah Azizan.
“The government is committed to reforms while ensuring essential goods and services remain tax-free to safeguard the public,” he assured. Additional revenue will help improve public services, increase cash aid, and upgrade infrastructure.
Key Points of the Revised Tax Structure:
• Essential goods (e.g., fresh produce, rice, cooking oil, bread, sugar, medicine, and construction materials) remain exempt from sales tax.
• Non-essential or luxury items face a new sales tax:
• 5% tax on goods like king crab, imported fruits, truffle mushrooms, essential oils, and silk fabrics.
• 10% tax on premium products such as racing bicycles and antique paintings.
Service Tax Revisions:
• Beauty Services: 8% tax for providers with taxable value over RM500,000 per year.
• Leasing & Rental: 8% tax, except for residential rentals, reading materials, and MSMEs with rental income under RM500,000 annually.
• Construction: 6% tax for firms earning above RM1.5 million annually; residential projects and public-use facilities are exempt.
• Financial Services: 8% tax on fee/commission-based services, but core banking, Shariah-compliant financing, forex gains, and capital markets remain exempt.
• Private Healthcare: 6% tax on services for foreigners if annual revenue exceeds RM1.5 million; all services for Malaysians are tax-free.
• Private Education: 6% tax on international schools charging over RM60,000 per student/year and for non-Malaysian higher education students; Malaysians are fully exempt.
Originally planned for May 1, this tax expansion was officially gazetted on June 9 after being announced in Budget 2025 by Prime Minister Datuk Seri Anwar Ibrahim.
To ease the transition, the government will not penalize companies making efforts to comply by December 31, 2025. Businesses are encouraged to seek guidance from the Royal Malaysian Customs Department on registration and tax responsibilities.
