Expansion of Sales and Service Tax (SST) Scope Effective 1 July 2025
- StanleyCo
- Jun 10
- 2 min read
Updated: Jun 11
The Royal Malaysian Customs Department has announced key changes to the Sales and Service Tax (SST) regime, effective 1 July 2025. These changes involve a broader scope of Service Tax, with six new categories added, as well as adjustments to the Sales Tax rates on selected discretionary and premium goods. These changes may affect your business operations and pricing strategies.
SALES TAX UPDATES
The Government has maintained 0% Sales Tax on essential goods to reduce the impact on consumers. This includes:
Basic food items (e.g. chicken, beef, rice, cooking oil)
Medicines and medical equipment
Educational materials and basic construction supplies
However, selected discretionary items will now be taxed:
5% on items such as imported fruits, king crab, truffle mushrooms, essential oils, and industrial machinery
10% on premium items like racing bicycles and antique artworks
SERVICE TAX (SST) EXPANSION
The SST scope will now include the following six new categories:
Service Category | Tax Rate | Threshold | Exemptions / Remarks |
Leasing & Rental | 8% | RM500,000 | Exempt: Residential property leases, MSMEs, B2B transactions, overseas asset leasing. |
Construction | 6% | RM1.5 million | Exempt: Residential and public housing projects, B2B contracts, 12-month grace for existing (non-reviewable) contracts. |
Financial Services | 8% | Based on fees/commissions | Exempt: Basic banking, Islamic financing (profit-based), FX/capital market gains, remittance services, life/medical insurance brokerage. |
Private Healthcare | 6% | RM1.5 million | Applies only to services provided to non-citizens. Services to Malaysians are fully exempt. |
Education | 6% | RM60,000 per student/year | Applies to high-fee private preschools and secondary schools, and education services for foreign students. Malaysians (including OKU) are exempt. |
Beauty Services | 8% | RM500,000 | Includes: Facials, hairstyling, makeup, tattooing, body slimming treatments (e.g. herbal baths). |
The expanded SST framework represents a significant shift in Malaysia’s indirect tax landscape, with broad implications for pricing, compliance, and operational planning across multiple sectors. Businesses are encouraged to review their service offerings and revenue thresholds to determine if they fall within the new scope, and to take the necessary steps to ensure compliance ahead of the implementation date.
For further details, please refer to the attachment provided.
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