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Effective 1 July 2025, the Malaysian government will revise the list of items subject to sales tax and expand the scope of service tax. These measures aim to strengthen the country’s fiscal position by increasing revenue and broadening the tax base.
Sales Tax Revision
The sales tax revision covers certain discretionary items that have been reclassified from 0% to 5%, including king crab, salmon, cod, truffles, mushrooms, imported fruit, essential oils, silk fabrics, and industrial machinery.
Several premium discretionary items are now subject to a higher sales tax rate of 10%, including racing bicycles and antique hand-painted artworks.
However, on 29 June 2025, the Ministry of Finance (MOF) decided to exempt imported oranges, apples, mandarin oranges and kurma from charging sales tax.
Expanded scope of Service Tax
With the expansion of the scope of the Service Tax, six additional categories of services will now be subject to service tax (either 6% or 8%) as set out below.
1. Leasing or Rental Services
Service tax will be imposed at a rate of 8% by service providers whose total leasing or rental revenue exceeds the RM 1,000,000* threshold within a 12-month period, except for the following:
2. Construction Services
A Service Tax at a rate of 6% will be imposed on contractors with revenue exceeding RM1.5 million within a 12-month period, except for the following:
3. Financial Services
A Service Tax at a rate of 8% will be imposed on fee- or commission-based financial services. The following categories are exempt:
4. Private Healthcare Services
A service tax of 6% will be imposed on private healthcare, traditional and complementary medicine, and allied health services provided to non-citizens by service providers exceeding the RM1.5 million threshold.
The following categories are exempt for Malaysian citizens:
5. Education Services
A Service Tax at a rate of 6% will be imposed on the following:
The following categories are exempt:
6. Beauty Services
Following the Ministry of Finance’s (MOF) announcement on 29 June 2025, the government has decided to continue exempting this service sector from service tax.
* Revised on 29 June 2025 by the Ministry of Finance (MOF) Malaysia.
Action Required by Businesses
Any non-registered businesses that exceed the threshold in July 2025 must submit their registration application to the Royal Malaysian Customs Department (RMCD) by the end of August 2025. They will then be obliged to charge Service Tax from 1 September 2025 onwards.
Existing registrants do not need to register with RMCD again. Instead, they must update their registration details by adding the new category in the MySST portal, and charge service tax on new services from 1 July 2025 onwards.
To support a smooth transition, businesses affected by the expanded Sales and Service Tax (SST) will be granted a grace period until 31 December 2025. During this period, enforcement actions such as prosecution and penalties will not be pursued. This transitional arrangement aims to provide businesses, particularly micro, small and medium-sized enterprises, with sufficient time to adapt to the new obligations.
Remarks: All of the above may be subject to change as discussions between the relevant business societies and government authorities are ongoing.
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