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Starting 1 July 2025, the revised SST will come into effect with a sharper focus on taxing non-essential goods and expanding the scope of services, while aiming for minimal impact on citizens and businesses.
Come July, Malaysia’s MADANI Government will roll out a revision to its sales tax rate and widen the scope of the service tax. This move was first announced in Budget 2025 and is aimed at strengthening the country’s fiscal position without placing "undue burden" on most Malaysians.
The upcoming changes to the Sales and Service tax (SST), set to take effect on 1 July 2025, were finalised following engagements with key stakeholders, including industry associations and tax agents. Input from these groups was incorporated into the legislative framework to ensure that the majority of the citizens would not be affected, and to mitigate the impact on businesses particularly micro, small, and medium enterprises (MSMEs), YB Senator Datuk Seri Amir Hamzah Azizan, Finance Minister II said.
He added that the added revenue from these SST enhancements will enable the Government to improve public services, such as through increased direct cash assistance, enhanced infrastructure, and more efficient service delivery.
What’s changing?
1. Sales tax
There will be no change in the tax rate for essential goods that are commonly consumed by the public. However, non-essential and discretionary goods will soon be subject to either a 5% or 10% sales Tax.
2. Service tax
The most significant adjustment comes in the expanded scope of the service tax, which now covers:
- Leasing or rental
- Construction
- Financial services
- Private healthcare
- Education
- Beauty services
This expansion includes targeted exemptions designed to avoid cascading taxes and to ensure that basic services essential to the citizens remain unaffected.
The Government acknowledged the importance of supporting regulatory compliance as companies prepare for the revised SST framework. Businesses that actively take steps to fulfil the prescribed legal requirements will not be subject to prosecution or penalties until 31 December 2025.
Further details, including subsidiary legislation, general rulings, guidelines, and FAQs, will be made available through official channels of the Ministry of Finance and the Royal Malaysian Customs Department.
For the full breakdown of the SST changes, read here.
Lead image / Malaysia Ministry of Finance
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