As Malaysia gears up for a significant shift in its tax landscape, businesses and consumers need to prepare for the expanded Sales and Service Tax (SST) set to take effect on 1 July 2025. Announced in Budget 2025 on 18 October 2024, this expansion marks a pivotal move to strengthen Malaysia’s fiscal framework under the MADANI Government, ensuring sustainable revenue to fund essential public services. With new goods and services now taxable, the changes will impact businesses in their pricing, compliance, and operations across multiple sectors.
In this article, we break down the key changes, affected sectors, exemptions, and practical steps for businesses to meet your compliance obligations. Whether you’re a business owner, financial professional or consumer, our tax professionals at BoardRoom are here to equip you with the insights and guidance needed to adapt seamlessly to the new SST framework.
Overview of Malaysia’s SST System
Malaysia’s Sales and Service Tax (SST) is a single-stage tax system designed to generate revenue while keeping essential goods and services affordable. It comprises two components: Sales Tax, applied to manufactured or imported goods, and Service Tax, levied on specific services provided in Malaysia.
The SST system, reintroduced in 2018 to replace the Goods and Services Tax (GST), was designed to simplify taxation and reduce costs of living. As of March 2024, Sales Tax rates stand at 5% or 10%, depending on the type of goods, while Service Tax rates are 6% or 8% for designated services, applied to businesses with annual revenue exceeding RM500,000 (or RM1.5 million for food and beverage services).
This 2025 expansion, effective 1 July 2025, broadens its scope to include non-essential goods and additional service sectors, with the aim to boost revenue while keeping essentials tax-free. In the next sections, we take a look at the changes and how companies should prepare themselves for the changes.
Key Changes in the Expanded SST Effective 1 July 2025
Below are the key changes in the expanded scope of SST. Please note that the list of items are not exhaustive, and varying registration thresholds apply to the taxable services.
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Basic consumer goods are exempted from sales tax:
- Essential goods such as chicken, fish, lamb, vegetables, local fruits, rice, milk, cooking oil, medicine etc.
- Basic construction materials.
- Agricultural items (e.g. fertilisers) and equipment.
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Non-essential goods are now taxable at 5%:
- King crabs, salmon, imported fruits, silk and industry machinery.
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Premium goods are now taxable at 10%:
- Goods such as racing bicycles and antique artworks.
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Rental or leasing services taxable at 8%
- Applies to all service providers whose rental or lease incomes exceeds RM500,000 in a 12-month period.
- Exemptions:
- Residential buildings, reading materials, financial leasing and tangible assets outside Malaysia.
- MSMEs tenants with annual revenue under RM500,000.
- B2B and Group Relief to avoid tax cascading.
- 12-month exemption from effective date for non-reviewable contracts.
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Construction services taxable at 6%
- Applies to all services providers whose value of taxable services exceeds RM1.5 million in a 12-month period.
- Exemptions:
- Residential buildings and public facilities related to residential buildings.
- B2B and Group Relief to avoid tax cascading.
- 12-month exemption from effective date for non-reviewable contracts.
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Financial Services taxable at 8%
- Applies to fee or commission-based financial services.
- Exemptions:
- Basic services for Malaysians e.g. basic banking.
- Foreign exchange gains, capital market deals, penalty fees, outward remittances, export-related financing.
- Inbound transfer charges to foreign remittance agents.
- Brokerage/underwriting for life, medical and family insurance or takaful.
- B2B transactions, shariah-compliant fees and services for Bursa Malaysia or Labuan.
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Private healthcare services taxable at 6%
- Applies to private healthcare, traditional and complementary practices and allied health services for foreigners.
- For value of taxable service that exceeds RM1.5 million in a 12-month period.
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Education services taxable at 6%
- Applies to private preschools, primary and secondary schools.
- If annual tuition fees exceed RM60,000 per student.
- For private higher education for international students.
- Exemptions:
- Malaysian students with disabilities.
- Malaysian students in private higher education.
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Beauty services taxable at 8%
- Applies to services like facial treatment and hairdressing.
- For value of taxable service that exceeds RM500,000 in a 12-months period.

Implementation Timeline
The new regulations will take effect on 1 July 2025, with a grace period extending to 31 December 2025, during which no prosecution or penalties will be enforced. This allows businesses sufficient time to adapt to the changes.
Impact of Expanded Scope of SST on Businesses
The expanded scope of the Service Sales Tax (SST) introduces significant changes for businesses in newly taxable sectors, requiring them to adapt to new compliance and pricing demands.
Below are some key impact:
- Businesses in newly taxable sectors, such as private education and beauty services, must assess their Service Tax registration obligations and ensure compliance.
- Companies with an annual turnover exceeding RM500,000 (or RM1.5 million for food and beverage services) are required to register for SST.
- Businesses may need to make adjustments to their pricing strategies to accommodate the tax increases, particularly for non-essential goods and services.
Action Steps for Businesses
To comply with the expanded Service Sales Tax (SST) regulations, businesses must take proactive steps to ensure adherence to compliance requirements.
The following outlines the key actions:
Register for Service Tax
Businesses with annual revenue exceeding RM500,000 (or RM1.5 million for construction and food & beverage sectors) must register via the MySST portal, with separate registrations for Sales Tax and Service Tax. After submitting the registration, companies can check their registration status on the same portal.
File Bimonthly Returns
Businesses must file their SST returns bimonthly, by submitting SST-02 forms through the MySST portal by the last day of the month following the taxable period.
Penalties may be imposed for offenses such as failing to pay the correct net tax amount, not submitting an SST return, submitting an SST return with no payment or underpayment, or failing to register for SST.
Late Payment Penalty:
- 10% of the amount not paid after the last date of the first 30 days period.
- 15% of the amount not paid after the last date of the second 30 days period.
- 15% of the amount not paid after the last date of the third 30 days period.
Seek Professional Guidance
Consult a tax professional to navigate SST obligations and exemptions, ensure compliance, and address specific business needs related to SST regulations.
Businesses should maintain accurate records for seven years, as mandated by the Royal Malaysian Customs Department (RMCD).
How can BoardRoom Support your Business?
Navigating Malaysia’s expanded SST can be complex, but BoardRoom is here to simplify the process. With over 50 years as Asia-Pacific’s leading corporate services provider, BoardRoom offers an integrated suite of services from Tax and Accounting to Payroll, Employee Share Schemes, Corporate Secretarial, Share Registry, IPO and Sustainability services. Our team of tax specialists helps businesses seamlessly adapt to new SST regulations, ensuring compliance while minimising operational disruptions. From handling registrations to tax compliance and strategic tax planning, we tailor our solutions to your unique needs.
Unsure if you’re ready for the new SST rules? Contact us for a consultation today!
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