THE government has announced a series of reforms to the Sales and Services Tax (SST) policy, set to take effect from 1 January 2026, in measures expected to directly benefit households, support small businesses, and stabilise prices across key sectors.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim said the enhancements aim to alleviate the rising cost of living while maintaining fiscal balance.
Among the key measures is a reduction of the service tax rate on rentals and leases from eight per cent to six per cent, a move expected to lower operating costs for traders and help keep goods and services affordable for consumers.
The government has also increased the annual turnover threshold for micro, small, and medium enterprises (MSMEs) exempt from service tax from RM1 million to RM1.5 million, allowing a broader range of small traders to operate without passing the tax burden onto customers.
“This adjustment enables small businesses to sustain operations without transferring additional costs to consumers, directly supporting household affordability,” the announcement noted.
Newly established MSMEs will enjoy a one-year exemption from service tax on rentals or leases from the date of company registration, providing incentives for business growth and job creation.
In agriculture and food production, the exemption of sales tax on critical raw materials and inputs, including livestock feed, fertilisers, and pesticides, is designed to curb manufacturing costs and prevent price spikes in essential commodities.
This measure also contributes to stabilising the national food supply chain and alleviating inflationary pressures on low- and middle-income households.
The construction sector will benefit from extended exemptions on service tax for projects signed before the SST expansion, mitigating cost increases and reducing the risk of higher prices for residential and commercial properties.
Exemptions also cover the construction of places of worship, such as mosques, suraus, temples, churches, and shrines, reflecting the government’s commitment to supporting social and spiritual needs without imposing additional taxes.
“These enhancements to the SST policy are part of the government’s broader strategy to balance national revenue requirements with the welfare of the rakyat,” the Prime Minister said, emphasising that the reforms are intended to provide tangible relief for households, encourage enterprise development, and maintain price stability across vital sectors. - January 6, 2025
