The Malaysian government no longer implements the goods and services tax; rather, the new tax system in place is known as the sales and service tax in Malaysia. Goods and service tax was implemented for a few years between 2015 and 2018, but since 2018, the sales and service tax has replaced it. GST was found to increase the cost of living for the average Malaysian; hence, its abolishment. Sales and service tax in Malaysia, on the other hand, reduce the cost of living.
Sales and Services Tax in Malaysia 2025: An Overview
There are two components to the sales and service tax: Sales Tax and Service Tax. And here is what they mean:
Sales Tax in Malaysia
The service tax is a consumption tax that applies to all taxable services provided by service providers that are registered in Malaysia. The service tax rate ranges from 6% to 8% depending on the service provided. Services being imported or exported fall into the exemption category while all other services attract a 6% to 8% services tax.
Services Tax in Malaysia
The service tax is a consumption tax that applies to all taxable services provided by service providers that are registered in Malaysia. The service tax rate is constant for all services except those exempted from payment. Services being imported or exported fall into the exemption category while all other services attract a 6% services tax.
Sales and Services Tax in Malaysia 2025: The Upsides
Sales and service tax comes with many benefits that make it the ideal replacement for the goods and service tax system and these include:
- SST is a relatively simple system to understand
- There are fewer refund issues with SST
- Lets consumers be in control of what they pay as tax
Sales and Services Tax in Malaysia 2025: The Downsides
It may be a great system, but there are still a few issues that are associated with SST. The most obvious disadvantage here is that the tax is based on sales and it comes at a cost to the business.
Sales and Services Tax in Malaysia 2025: Businesses Required to Register
In addition to providing taxable goods and services, your business will still need to meet further criteria before you are eligible for sales and services tax. The added criteria you are required to meet is to have met a sales target of RM 500,000 over a year, either from goods or services. Once you meet both criteria, then registration for the sales and service tax is mandatory for your business.
For service tax, the sales target may vary depending on the kind of service that your business provides. In some cases, there is no specific target before you are to register for the sales and service tax. As long as you provide service to the people, then you are required to register. Services that fall into this category include Certified custom Agents Credit card issuers and Credit card services.
In other instances, the sales target needs to meet before qualifying for the sales and service tax. The target for such business is as high as RM 1,500,000. The services that fall into this category include: All food and drink providing services, whether it is eat-in service or take away service.
Sales and Services Tax in Malaysia 2025: Registration Process
Once your business qualifies for registration of sales and service tax, you will need to get registered with the appropriate body. MySST is the appropriate body for this and registration is done on their website. Once your company qualifies for the sales and service tax, you have till the last day of the following month to register your company. To put this into context, let’s look at a hypothetical scenario:
Your business meets the RM 500,000 or 1,500,000 target over a year on October the 26th. You will therefore have till the 30th of November in the same year, to register your business for the sales and service tax. If on the other hand, your business is exempted from the sales and service tax, you will still need an exemption permit and can apply for one on the MySST website.
Sales and Services Tax in Malaysia 2025: Registration for Foreign Companies
To qualify for the sales and service tax, your company would need to have an office in Malaysia. If as a foreign company, you don’t have a base of operations in Malaysia, then you are exempted from goods and services tax. You also cannot choose to register for the goods and services tax voluntarily, you need to qualify for it. Therefore, a foreign company will need to have a permanent office in Malaysia and meet the other criteria to qualify for goods and services tax.
Sales and Services Tax in Malaysia 2025: Penalty for Defaulting
Sales and service tax defaulters will face penalties, depending on their offenses. Here are some popular sales and services tax offenses in Malaysia and their penalties:
- For failure to file your SST returns or failure to make an SST payment, you can be faced with a jail term of up to three years or asked to pay a fine of up to RM 50,000. In some cases, however, you may be asked to pay a fine and also serve a jail sentence.
- For late payment, in the first month of missing a payment, an additional 10% is added to the SST. By the second month, the penalty rises to 25% and if it gets into the third month, then there is a 40% extra fee on the SST.
- For tax evasion, there are different penalties, depending on the number of offenses. For first-time offenders, the penalty ranges between 10x – 20x the SST due. You can also face a jail term of up to five years or a combination of both. Second-time offenders, on the other hand, will pay between 20x – 40x the SST due and up to seven years in jail, or both.
Sales and Services Tax in Malaysia 2025: Compliance Tips
Understanding the Importance of SST Compliance
With Malaysia’s tax environment becoming increasingly regulated, compliance with the Sales and Services Tax in Malaysia 2025 is more critical than ever. The Royal Malaysian Customs Department (RMCD) continues to enhance digital monitoring and enforcement, making it essential for businesses to ensure accuracy and timeliness in their SST filings. Staying compliant not only helps avoid penalties but also maintains business credibility and operational continuity.
Proper Registration and Threshold Assessment
A fundamental step in SST compliance for 2025 is verifying whether your business meets the registration thresholds, RM500,000 for taxable goods and RM1.5 million for taxable services. Conducting an early assessment of annual turnover allows businesses to register on time and avoid retrospective tax liabilities. It is equally important to review operations regularly, as certain products or services may now fall under taxable categories introduced in the latest SST updates.
Maintaining Accurate Records and Documentation
Effective record-keeping forms the foundation of SST compliance. All taxable transactions, invoices, import records, and related documents should be properly organized and retained. This ensures the accuracy of figures reported in tax returns and supports businesses during RMCD audits. Misclassification of goods or services remains a common issue, so reviewing current SST schedules and staying informed about regulatory updates is crucial.
Timely Filing and Payment of SST Returns
For the Sales and Services Tax in Malaysia 2025, timely submission of returns and payments is vital. Returns are typically due every two months, and delays may result in significant penalties. Setting up an internal compliance calendar and allocating sufficient time for data verification before submission can prevent costly oversights.
Building a Culture of Ongoing Compliance
Businesses that maintain transparency, monitor tax changes, and implement consistent review processes are better positioned to meet their SST obligations. By prioritizing accuracy, timeliness, and record integrity, companies can confidently manage their responsibilities under the Sales and Services Tax in Malaysia 2025 while supporting long-term compliance readiness.
Tax Consulting for Sales and Services Tax in Malaysia 2025
At Premia TNC, we offer consulting services on sales and services tax in Malaysia. Our services also include company registration, incorporation, and accounting services. You can reach out to us so that we can help you determine if and when your company will become eligible for sales and services tax registration. This way, you can avoid all penalties that may arise from not registering your business for both taxes.
