Expanded SST Malaysia 2025: Tax Rates, Exemptions, and What to Prepare

Starting 1 July 2025, the Malaysian government will implement the Expanded SST (Sales and Service Tax) Malaysia.

This change is part of the country’s move to widen the tax base and strengthen its financial position.

If you have a business involved in services and the sale of non-essential goods, this update is important to understand.

The changes affect both the sales tax and service tax, with specific rates and rules depending on the item or service category.

What’s New in the Expanded SST (Effective 1 July 2025)

The government is introducing wider tax coverage. Six new service categories will be taxed, and new rates apply to several types of goods.

These changes are designed to focus more on luxury or non-essential consumption, while basic needs remain exempt.

New Sales Tax Rates on 1 July 2025

Sales Tax Rate	Goods Affected
0% (Tax-Free)	Unprocessed items: chicken, beef, mutton, fish (tilapia, tongkol), prawns, squid, vegetables, local fruits, rice, barley, oats, wheat. Processed items: flour, canned sardines, sugar, salt, white bread, pasta, mee hoon, noodles, instant noodles, milk, malt drinks, cooking oil, Medicine, medical devices Books, journals, newspapers, Livestock feed, pet food Basic construction materials: cement, stones, sand Agricultural inputs: fertiliser, pesticide, agricultural Farming machinery
5%	Salmon, cod, king crab, truffles, imported strawberries, essential oils, silk fabric, industrial machinery, smartphones, smartwatches, baby strollers, abalone, lobster, quinoa, cheese, fruit jams
10%	Caviar, shark fins, racing bicycles, antique hand paintings, alcoholic beverages, cigarettes, cigars, leather goods, tungsten scrap waste

What's Included & Exempted on Service Tax Expansion

The government is expanding the service tax to cover six new service types: rental or leasing, construction, financial services, private healthcare, education, and beauty services. These services will be taxed between 6% and 8%, depending on the type.

Rental or Leasing

An 8% service tax applies to rental or leasing services if the business earns more than RM500,000 a year. This includes equipment and commercial space rentals.

Exemptions:

Residential property rentals
Leasing of reading materials
Leasing of physical assets outside Malaysia
MSMEs with annual earnings below RM500,000
Business-to-business (B2B) transactions
12-month exemption for non-reviewable contracts from the date of the service tax’s implementation.

Construction Sector

Construction work for infrastructure, commercial, and industrial buildings will be taxed at 6% if the contract value is above RM1.5 million within 12 months.

Exemptions:

Residential housing and public housing facilities
B2B transactions
12-month exemption for non-reviewable contracts from the date of the service tax’s implementation.

Financial Services

Financial services based on fees or commissions will be taxed at 8% if the total amount exceeds RM500,000 per year.

Exemptions:

Basic banking services (e.g., savings and current accounts)
Profits from Islamic financing (shariah-compliant)
Credit and charge card fees
Gains from foreign exchange and capital markets
Outward remittances and charges to overseas remittance agents
Financial services related to exports
Brokerage and underwriting for life, medical, and family insurance
B2B financial services
Services from Bursa Malaysia and Labuan

Private Healthcare Services

Private healthcare providers will charge 6% service tax, but only for non-Malaysians. Malaysians are fully exempt, including for traditional and complementary care.

Exemptions:

Malaysian citizens
Traditional, complementary, and allied health services
Healthcare services under public universities (Universities and University Colleges Act 1971 and the Universiti Teknologi Mara Act 1976)
Providers earning below RM1.5 million/year

Education

A 6% tax applies to private schools, primary, and secondary schools, including higher learning institutions and language centers, if they charge more than RM60,000 per student annually.

Exemptions:

Malaysian students
Students with disability cards (OKU)
Public education providers

Beauty Services

Beauty businesses like make-up services, manicures and pedicures, hairdressing, body slimming, tattoos, herbal, milk, and flower baths, and facial treatments will be taxed at 8% if revenue exceeds RM500,000 annually.

Exemptions:

Businesses earning below RM500,000

Service Category	Tax Rate	Registration Threshold	Main Exemptions
Rental/Leasing	8%	RM500,000/year	Residential rentals, MSMEs, B2B, reading materials, contracts signed earlier
Construction	6%	RM1.5 million/12 months	Residential housing, public projects, B2B, non-reviewable contracts
Financial Services	8%	RM500,000/year in fees/commissions	Basic banking, Islamic finance, remittances, capital markets, B2B, insurance
Private Healthcare	6%	RM1.5 million/year	Services for Malaysians, traditional/complementary care, and university healthcare
Education	6%	No threshold (RM60k/student rule)	Malaysian citizens, OKU students, and public education
Beauty Services	8%	RM500,000/year	Providers earning below the threshold

When will it be implemented?

The Expanded SST Malaysia was originally planned to begin on 1 May 2025, but the government has delayed implementation to 1 July 2025.

This extra time is meant to give businesses more time to adjust and prepare their systems, communication, and tax processes

Why the Government Implements SST Expansion

The goal is to increase national revenue by about RM5 billion without adding cost pressure to everyday necessities.

The funds are meant to support healthcare, education, infrastructure, and social programmes. At the same time, the government is keeping tax exemptions for basic items to reduce the financial impact on the public.

Who Will Be Affected

Businesses involved in luxury goods, construction, finance, private education, and healthcare will be directly impacted. This includes:

Importers or sellers of luxury/non-essential goods
Construction and real estate firms
Financial and insurance providers
Beauty and wellness businesses
Private healthcare and education providers
Employers offering private medical coverage for foreign staff
General consumers of non-essential goods.

How to Calculate SST in Malaysia

While the SST rate remains the same, the coverage has expanded to include more services.

To calculate SST, first check if your business needs to register based on your annual revenue.

If you're in rental, beauty, or financial services and earn over RM500,000 per year, you're required to register. For construction or private healthcare, the threshold is RM1.5 million.

Next, determine the correct SST rate for your service. Most services are now taxed at either 6% or 8%.

For example, rental/leasing, beauty, and financial services are taxed at 8%, while construction, private healthcare, and education are taxed at 6%.

Then, check if your service is exempted. Services like residential rental, public education, Islamic finance, or B2B transactions may be excluded from SST.

If your service is taxable, apply this formula: SST Amount = Service Fee × SST Rate

Include the SST in your invoice. For example, if you charge RM2,000 for a service at 8% SST, the tax is RM160, and the total bill is RM2,160.

Registered businesses are responsible for collecting and submitting SST to the government. If unsure, it’s best to check with official tax guidelines or a licensed tax consultant.

Penalties & How Businesses Should Do

There will be no penalties for non-compliance with the expanded SST until 31 December 2025. During this period, businesses are expected to take proactive steps:

Check if your business has reached the SST registration threshold
Update your pricing and invoicing systems to reflect the new tax rates
Inform customers clearly about any price changes related to SST

FAQs

Will my business be affected by the expanded SST?

Your business may be affected if you provide services or sell goods that are now included in the expanded SST list. This includes sectors like rental or leasing, construction, finance, private healthcare, education, and beauty services.

You should also check if you sell non-essential goods such as smartphones, imported food, or luxury items that will be taxed at 5% or 10%. The best way to confirm is to review your business activities and check whether they meet the new tax conditions or thresholds under SST.

What goods are now taxed at 5% or 10%?

Goods taxed at 5% include items like salmon, cod, smartphones, smartwatches, baby strollers, imported strawberries, essential oils, silk fabric, industrial machinery, abalone, lobster, quinoa, cheese, and fruit jams.

Goods taxed at 10% include caviar, shark fins, alcoholic beverages, cigarettes, cigars, leather products, racing bicycles, antique hand-painted artworks, and tungsten scrap waste.

These goods are considered non-essential or luxury items under the expanded SST.

Are local food items still tax-free?

Yes. Local and essential food items remain tax-free under the expanded SST. This includes unprocessed items like chicken, beef, fish (such as tilapia and tongkol), prawns, squid, vegetables, and local fruits.

Processed essentials such as flour, noodles, canned sardines, white bread, milk, cooking oil, sugar, and salt are also not taxed.

The government is keeping these exemptions to avoid adding pressure on everyday living costs.

Do I need to register for SST now?

You need to register if your business provides taxable services or sells taxable goods and your revenue meets the required threshold.

For most service categories under the expanded SST, the threshold is RM500,000 per year, except for construction services, which is RM1.5 million within 12 months.

Some sectors, like private education for international students, require registration even without a revenue threshold.

It’s important to review your business activities and check if you fall under the updated SST coverage starting 1 July 2025.

When will enforcement start?

The expanded SST will take effect on 1 July 2025, but there will be no penalties or enforcement actions until 31 December 2025.

This grace period gives businesses time to adjust, register (if required), and update their pricing and invoicing systems. However, it’s still important to start preparing early to avoid last-minute issues.

Is Malaysia SST 6% to 8%?

The service tax under the expanded SST now ranges between 6% and 8%, depending on the type of service. For example, construction and private healthcare services are taxed at 6%, while rental, financial, and beauty services are taxed at 8%.

The sales tax remains at 5% or 10%, depending on the type of goods.

What is the SST rate in Malaysia?

Malaysia’s Sales and Service Tax (SST) has two parts:

Sales tax is charged at 5% or 10%, depending on the type of goods.
Service tax is charged at 6% or 8%, depending on the type of service.

What is the SST in Malaysia 2025?

The SST in 2025 refers to the expanded Sales and Service Tax system that starts on 1 July 2025. It covers more goods and services than before, including new service categories like rental, construction, finance, private healthcare, education, and beauty.

While the tax rates remain within the existing range, more businesses will now fall under SST due to the wider scope.

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