Malaysia

Govt to implement targeted revisions to SST from July 2025 - Amir Hamzah

Recalibrated sales and service tax measures aim to broaden revenue base while protecting everyday consumers and small businesses

Updated 1 year ago · Published on 09 Jun 2025 5:45PM

Govt to implement targeted revisions to SST from July 2025 - Amir Hamzah
The MADANI Government has adopted a targeted approach that exempts essential goods and services from taxation - June 9, 2025

THE Ministry of Finance (MOF) announced today that the government will implement a targeted revision of its Sales and Service Tax (SST) regime from 1 July 2025, as part of broader fiscal reform under the MADANI Economy framework.

Previously announced during Budget 2025, the changes aim to strengthen national revenue without burdening the majority of citizens.

Finance Minister II Senator Datuk Seri Amir Hamzah Azizan said the recalibration is intended to "enhance the country's fiscal position by increasing revenue and broadening the tax base, while improving social safety nets and avoiding added pressure on the general population."

"To ensure that the majority of Malaysians are not impacted, the MADANI Government has adopted a targeted approach that exempts essential goods and services from taxation," he said in a statement released by MPF today.

Provisions will also be made to ease the compliance burden for micro, small and medium enterprises (MSMEs).

The revised SST structure follows an engagement process with industry associations and tax practitioners. Legal provisions are being aligned to ensure minimal disruption to business and maintain public welfare.

The government confirmed that no legal action or penalties will be imposed on businesses working towards SST compliance until 31 December 2025.

Sales Tax adjustments

Sales tax rates will remain at 0 (zero) per cent for essential daily goods such as rice, vegetables, local fruit, white bread, basic medical items, and livestock products. Construction materials and key agricultural inputs will also remain tax-exempt.

The 5 per cent sales tax will apply to selected discretionary items, including imported fruits, essential oils, silk fabrics and truffles. A 10 per cent rate will be imposed on higher-end items such as racing bicycles and antique hand-painted artwork.

Expansion of Service Tax scope

The service tax will be extended to six new categories: leasing, construction, financial services, private healthcare, private education, and beauty services.

For leasing services, an 8 per cent tax will apply to providers with annual leasing revenue above RM500,000. Exemptions will include residential leasing, reading materials, and cross-border leasing. MSMEs and intra-group business services will also be excluded to avoid double taxation.

Construction services will be taxed at 6 per cent for providers exceeding RM1.5 million in annual value. Residential buildings and public housing infrastructure will be exempt, as will business-to-business services.

Financial services will be taxed at 8 per cent, but essential banking functions and Islamic financing products will be excluded. Commissions, forex gains, cross-border remittances and certain insurance-related fees will not be taxed.

Private healthcare and traditional medical practices will face a 6 per cent service tax—but only for services provided to non-citizens, and only if the provider's annual revenue exceeds RM1.5 million. Malaysians will be exempt, including for physiotherapy and other allied health services.

In education, only high-fee private preschools, primary and secondary schools charging more than RM60,000 per student annually will be subject to the 6 per cent tax.

Disabled Malaysian citizens will be exempt. Service tax will also apply to higher education institutions enrolling non-citizens, but not to Malaysians.

Beauty and grooming services—including facial treatments and hairstyling—will be taxed at 8 per cent for providers earning over RM500,000 in taxable services over 12 months.

Implementation support and industry guidance

Legal amendments and official notices will provide time for industry players to assess their obligations, determine whether they cross the relevant revenue thresholds, and prepare for compliance.

The Royal Malaysian Customs Department will offer advisory support on registration, business model alignment, staff training and documentation.

The government said this recalibrated SST initiative is expected to generate additional fiscal resources for strengthening public infrastructure, boosting social assistance, and delivering improved public services—without disproportionately affecting lower- and middle-income households. - June 9, 2025

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