Malaysia's SST Expansion from 1 July 2025: New Services & Goods in Scope

The idea: broaden the base, protect essentials

The expansion was announced under Budget 2025 as a fiscal-consolidation measure. The Ministry of Finance's design principle was to raise revenue from discretionary spending and business-to-business services while leaving everyday essentials alone. Basic food, the first tier of essential goods, and services consumed by ordinary households were largely left out or exempted; the extra tax lands mostly on luxury goods and higher-value services. The MOF estimated the expansion would raise roughly RM3 billion a year.

Sales tax: non-essential goods now taxed at 5% or 10%

The sales tax rate itself was unchanged, but the list of taxable goods grew. Items that were previously exempt and are considered discretionary or premium — for example king crab, salmon and cod, imported fruits, truffles and essential oils, premium fabrics, antique artwork and racing bicycles — became subject to 5% or 10% sales tax depending on the category. Basic essential goods stayed exempt. After public feedback the government walked back a few inclusions (notably some imported fruits like apples and oranges), so the exact list has been revised — always check the current sales tax order for a specific product.

Service tax: six new categories in scope

The headline change is service tax. Six broad categories of services became taxable from 1 July 2025, each with its own rate and its own annual registration threshold. You only register — and only charge — once your taxable turnover in that category crosses the threshold over a 12-month period:

The key exemptions that keep households out

Each new category carries carve-outs aimed at protecting individuals and essentials:

• Rental/leasing — residential property is exempt, as are reading materials, financial leasing, and assets located outside Malaysia. The 8% bites on commercial leases once the landlord's rental income passes RM1 million.
• Construction — residential buildings (including those on mixed-development land) are within scope, but a narrow B2B exemption prevents tax cascading when a contractor buys the same type of construction service it supplies.
• Healthcare — services to Malaysian citizens are exempt; the 6% applies only to non-citizens, and government and university healthcare is out. This is aimed squarely at medical tourism.
• Education — only kicks in where fees exceed RM60,000 per student per academic year, or for non-citizens; services to Malaysian citizens, OKU cardholders, special-education schools and language centres are exempt.

B2B exemptions are narrow

A common misunderstanding is that all business-to-business supplies are exempt to avoid double taxation. They are not. The B2B exemption is drawn narrowly: it generally applies only when a registered person acquires the same type of taxable service that it itself provides. Buying a different taxable service from another provider is still taxed, so a business can be both charging service tax on its output and paying it on its inputs — because SST, unlike the old GST, has no input-tax credit to reclaim it.

The grace period on penalties

Recognising how much new compliance the expansion created, the government gave a transition window: for businesses that take steps to comply with the new SST requirements, no prosecution or penalties were imposed until 31 December 2025. That grace period covered registration, charging and filing — but it was a concession on enforcement, not a delay of the tax itself, which applied from 1 July 2025.

What this means for you

If you run a business, the first question is whether any of the six new categories describes what you sell, and if so whether your turnover in it crosses the threshold — if it does, you must register with the Royal Malaysian Customs Department (RMCD) and start charging. If you are a consumer, expect service tax to appear on more invoices than before: commercial rent, private schooling above the fee cap, financial fees and beauty services among them. Use the calculator below to add 8% or 6% to a price, or to strip SST out of a tax-inclusive figure, and confirm the precise rate, threshold and exemption for your situation against the official MySST portal (mysst.customs.gov.my).