PETALING JAYA – The reviewed and expanded Sales and Service Tax (SST) rates, as announced in Budget 2025, will come into effect on July 1, 2025, says the Finance Ministry.
In a statement on Monday (June 9), the ministry said this measure is to strengthen the country’s fiscal position by increasing revenue and broadening the tax base.
It added this would improve the quality of the social safety net without over-burdening the people.
Sales tax
From July 2025 onwards, items that remain in the 0% sales tax bracket include unprocessed items such as chicken, beef, mutton, fishes like tilapia and tongkol, prawns, squid, vegetables and local fruits, rice, barley, oat and wheat.
Processed items with zero-rated sales tax are flour, canned sardines, sugar and salt, white bread, pasta, mee hoon, noodles and instant noodles, milk, malt drinks and cooking oil.
A zero sales tax rate is also maintained for medicine and medical devices; books, journals and newspaper; livestock feed and pet food; basic construction materials like cement, stones and sand; as well as agricultural inputs like fertiliser, pesticide, agricultural and farming machinery.
Items and remaining in the 5% sales tax bracket are abalone and lobster, quinoa, cheese, fruit jams and smartphones.
Items that with sales tax revised to 5% beginning July 1 are king crab, salmon and cod, truffles, imported strawberries, essential oils, silk fabric and industrial machinery.
Items remaining in the 10% sales tax bracket are caviar, shark fins, alcoholic beverages, cigarettes, cigars and leather products.
Items that will see their sales tax increase to 10% are tungsten scrap waste, racing bicycles and antique hand paintings.
Service tax
The existing service tax scope will be expanded to cover six types of services – rental or leasing, construction work, financial, private healthcare, education and beauty.
Rental or leasing services
An 8% service tax will be imposed on rental or leasing services, with no tax imposed on residential housing, reading material, monetary leasing and tangible assets outside Malaysia.
Exemptions are given to business-to-business (B2B) transactions and relief groups to avoid double taxation.
Micro, small and medium enterprises (MSME) with less than RM500,000 annual turnover need not pay service tax, while non-reviewable contracts will be granted a 12-month exemption.
Construction work services
A 6% service tax will be levied on construction work services related to infrastructure, commercial and industrial buildings. Contractors must register if their taxable service value reaches RM1.5mil within 12 months, easing compliance for small and medium contractors. However, construction work services for residential buildings and public facilities related to residential houses are exempt from this tax. To prevent double taxation, B2B transactions benefit from exemption facilities. Additionally, non-reviewable contracts are granted a 12-month exemption from July 1.
Financial services
An 8% service tax applies to financial services based on fees or commissions. Providers must register if their total fees or commissions reach RM500,000 within 12 months. However, several services are exempt from this tax, including shariah-compliant financing profits; gains from foreign exchange and capital markets; brokerage and underwriting on life and medical insurance/takaful for individuals; fees on credit and charge cards; basic banking services (like savings and current accounts); exported financial services and penalty charges. B2B exemptions are available to avoid double taxation, certain fees in Shariah-compliant transactions receive exemptions, and service tax exemptions for Bursa Malaysia and Labuan are maintained.
Healthcare services
A 6% service tax is imposed on healthcare services provided to non-Malaysian citizens. This includes services offered by facilities under the Private Healthcare Facilities and Services Act 1998, private traditional and complementary medicine practices and private allied health services. Providers must register if the taxable value of their services reach RM1.5mil within 12 months. Healthcare services provided by the government and private healthcare services under the Universities and University Colleges Act 1971 and the Universiti Teknologi Mara Act 1976 are not subject to this tax. Malaysian citizens are exempt from paying service tax on private healthcare services, private traditional and complementary medicine and private allied health services.
Education services
A 6% service tax applies to private preschool, primary and secondary schools, including higher learning institutions and language centres. There is no minimum turnover threshold for registration but schools charging more than RM60,000 in annual tuition fees per student must register. Public education services are not taxable. Malaysian citizens who hold a disabled persons card (OKU) are exempt from paying the service tax. For higher learning institutions and language centres, there is no minimum turnover threshold for registration, but those providing education services to non-citizens must register. Malaysian citizens are exempt from paying the service tax.
Beauty services
An 8% service tax applies to beauty services. Providers must register if their taxable services reach RM500,000 within 12 months. Beauty services include facials, manicures and pedicures, hairstyling, tattoos, make-up services and body slimming, including herbal, milk and flower baths.
