THE Ministry of Finance (MOF) announced sweeping revisions to the country’s Sales and Service Tax (SST) regime, a move aimed at supporting small and medium enterprises, safeguarding the cost of essential goods, and facilitating key sectors of the economy.
Prime Minister Datuk Seri Anwar Ibrahim, who also serves as Finance Minister, confirmed the changes on 5 January 2026, with several measures taking effect immediately.
The Ministry outlined a series of amendments to Service Tax on rental and leasing services.
From 1 January 2026, the existing rate of 8 per cent will be reduced to 6 per cent.
Annual turnover thresholds for micro, small, and medium enterprises exempted from paying the tax have been increased from RM1 million to RM1.5 million.
Newly established businesses within this category will enjoy a one-year exemption from Service Tax on rental or leasing services, beginning from their registration date.
"The existing rate of 8 per cent will be reduced to 6 per cent," the Ministry emphasised.
Sales Tax exemptions will also apply to critical raw materials and inputs used by registered manufacturers, effective from 1 January 2026.
The Ministry explained that "this measure is intended to control the prices of essential goods for the majority of the population."
Items covered by the exemption include livestock feed, fertilisers, and pesticides, providing direct support to both agricultural and livestock production.
The government has extended Service Tax exemptions on construction contracts signed before 1 July 2025 that do not include reviewable clauses.
Originally valid until 30 June 2026, these exemptions will now continue until 30 June 2027, allowing agreements concluded before the SST expansion to benefit from two full years of exemption.
Furthermore, Service Tax will no longer apply to the construction of religious buildings, including mosques, suraus, temples, churches, and Chinese temples, with the exemption effective from 1 July 2025.
"Construction of religious buildings is therefore not subject to Service Tax," the Ministry clarified.
These measures reflect the government’s commitment to easing operational costs for businesses, maintaining affordability for consumers, and ensuring that essential and socially significant sectors are prioritised under the SST framework. - January 5, 2025
