4 minutes Understanding SST in Malaysia: Latest Rules and Rates Explained
Malaysia’s Sales and Service Tax (SST) system underwent significant changes in July 2025, impacting the way local and imported goods and services are taxed, and expanding the tax’s scope to cover more sectors than ever before. For businesses and consumers alike, staying updated on these new rules and rates is crucial to avoid penalties, control costs, and ensure compliance with Malaysian tax law. This detailed guide breaks down the latest SST framework—covering definitions, rates, exemptions, and practical action steps for 2025.
What is SST in Malaysia?
SST (Sales and Service Tax) is Malaysia’s principal indirect tax on the sale and consumption of goods and services. First reintroduced in 2018 to replace GST, SST operates on a single-stage principle: sales tax is applied at the manufacturing or import point for goods, and service tax is charged at the point of service for specified sectors. Consumers ultimately pay the tax, while businesses act as collectors, remitting SST to the Royal Malaysian Customs Department (RMCD).
Latest Rules and Expanded Scope (Effective July 2025)
The 2025 update introduces several headline changes designed to improve tax fairness and bolster government revenue:
- Broader Tax Base: Over 4,800 goods previously exempt or zero-rated are now taxed at 5%. These include luxury food items, essential oils, specific imported fruits, silk, and industrial equipment.
- Wider Service Tax Coverage: Newly included services now taxable include leasing and rental, construction, logistics, financial services, private healthcare (for foreigners), and high-end private education. Digital and online services are also affected.
- Registration Thresholds: Most businesses must register if their annual turnover exceeds RM500,000. For financial and leasing services, the threshold is now raised to RM1 million; for private education and healthcare, it stands at RM1.5 million.
2025 SST Rates Simplified
Sales Tax
- 0% Rate: Essential goods (basic food, certain medicines, etc.) remain tax-free.
- 5% Rate: Applies to select non-essential or processed goods (certain imported fruits, luxury food items, industrial products).
- 10% Rate: Covers most general and luxury goods, including designer bags, jewellery, and high-end electronics.
- Notably, apples, oranges, mandarin oranges, and dates are now exempt from the 5% imported fruits sales tax after public feedback.
Service Tax
- 6% Rate: Applies to food & beverage, telecommunications, parking, select logistics, private healthcare, and high-end education for foreigners.
- 8% Rate: Most other taxable services, including leasing/rental, construction, and financial services, are taxed at this rate.
Category | Previous Rate | New Rate (2025) | Notes |
Essential Goods | 0% | 0% | No change—maintains price stability on daily necessities |
Selected Premium Goods | 0% | 5% | Includes luxury foods, select machines, oils, imported items |
Luxury Goods | 5%/0% | 10% | Antique art, racing bikes, high-end products |
Rental/Leasing | 8% (RM500K) | 8% (RM1mil) | Higher threshold for small businesses |
Financial Services | 8% (RM500K) | 8% (RM1mil) | Higher threshold for registration |
Construction | N/A | 6% (RM1.5mi | Newly taxed sector |
Private Healthcare | N/A | 6% (RM1.5mil) | Applies to non-citizens, Malaysian citizens mostly exempt |
High-End Education | N/A | 6% (tuition >RM60k) | Foreigners, luxury tuition only |
Who Needs to Register for SST?
Businesses supplying taxable goods or services and surpassing their sector’s annual turnover threshold must register with Royal Malaysian Customs. The process is typically conducted online via the MySST portal, and separate registrations are required for sales tax and service tax. Failing to register exposes businesses to late fees and future audit risks, especially after the current penalty-free transition period, which ends December 31, 2025.
Exemptions and Special Rules
- Essential items: Basic food, common medicines, school supplies, and household staples remain exempt from both sales and service tax.
- Selective imported fruits: Based on June 2025 feedback, apples, oranges, mandarins, and dates are now tax-exempt as well.
- Beauty services: Despite initial proposals, services like manicures, facials, and hairdressing remain non-taxable; public feedback led to their exemption from the expanded list.
- Small businesses: Higher income thresholds for registration in some sectors reduce compliance pressure for micro and SME operators.
Penalties and Grace Period
A penalty-free grace period for the new SST framework runs until December 31, 2025. Late compliance after this period may result in substantial financial penalties:
Days Late | Penalty Rate |
1-30 | 10% |
31-60 | 15% |
61-90 | 15% |
91+ | Up to 40% |
This period allows businesses to review contracts, update finance and HR systems, retrain staff, and clarify vendor relationships—all essential for smooth SST compliance.
Practical Steps for Businesses and HR Teams
- Audit Supplier and Service Contracts: Flag any new or existing vendors affected by SST rate changes, and update contracts as needed.
- Update Accounting and Payment Systems: Integrate the correct SST codes and rates to ensure seamless compliance and reporting.
- Departmental Communication: Inform finance, procurement, and HR teams about SST updates to head off confusion or payment errors.
- Review Budgets and Forecasts: Adjust cost projections for Q3, Q4, and 2026 for any services or goods impacted by new tax rates.
- Use the Grace Period Wisely: Take advantage of the waiver on penalties to complete registration and process improvements
In conclusion, the 2025 SST reforms in Malaysia introduce wide-ranging changes that significantly affect how goods and services are taxed, the registration thresholds for businesses, and the scope of taxable activities, especially in the digital and service sectors. Staying on top of these changes is essential for both compliance and financial health.
For companies—especially those new to Malaysian taxation or expanding into new sectors—the most reliable approach is to seek expert guidance to understand sector-specific requirements and avoid costly compliance mistakes. Premia TNC specializes in SST consultation, company registration, incorporation, and ongoing compliance services tailored to Malaysian law and industry best practices. By partnering with tax professionals like Premia TNC, businesses can confidently navigate the evolving SST landscape, minimize risks, and remain focused on growth and operational excellence.
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