Updates on SST Expansion

 

Following the announcement on 9 June 2025 regarding the Sales Tax revision and Service Tax expansion, the MADANI Government has engaged with the public, industry stakeholders and backbenchers to gather feedback and address concerns. In line with this, on 27 June 2025, the Minister of Finance (MOF) announced four (4) key amendments to the previously expanded scope of the Sales Tax and Service Tax, effective 1 July 2025: 

 

·        Exemption from Sales Tax for selected imported fruits;

·        Increase in annual sales thresholds for rental or leasing and financial services;

·        Increase in annual sales threshold for Micro, Small and Medium Enterprises (MSMEs) to qualify for Service Tax exemption; and

·        Removal of newly taxable services under the Service Tax expansion. 

In addition, the Royal Malaysian Customs Department has issued further guidelines and policies relating to the Sales Tax revision and Service Tax expansion.

 

In line with the Government’s commitment not to impose Sales Tax on daily essential goods as part of the effort to ease the cost of living for Malaysians, the MOF has agreed to maintain the Sales Tax exemption on selected essential goods.

 

These Sales Tax-exempt essentials whether locally produced or imported include rice, chicken, beef, vegetables and eggs. In addition, local fish varieties such as selar, tongkol, cencaru and sardines, whether frozen, chilled or fresh, will continue to be exempted from Sales Tax.

Furthermore, the MOF has agreed to extend the Sales Tax exemption to imported apples, oranges, mandarin oranges and dates.

 

1.     Increase in the Registration Threshold 
A person who provides taxable services exceeding the registration threshold is required to be registered for Service Tax. The table below outlines the revised Service Tax registration thresholds:

 

2.     Increase in Annual Sales Threshold
Tenants classified as Micro, Small and Medium Enterprises (MSMEs) are exempted from Service Tax on rental and leasing services. The table below outlines the revised annual sales thresholds for MSMEs to qualify for the Service Tax exemption: 

 

3.  Group C – Wellness Centre - Removal of beauty services from the list of newly taxable services under the Service Tax expansion 

MOF has decided not to proceed with the proposed expansion of the Service Tax to include beauty services, including:

 

·        Manicure and pedicure treatments;

·        Facial services; and

·        Barber and hairdressing services. 

Despite the recent amendments, any person affected by the Sales Tax revision and Service Tax expansion is still required to assess and monitor whether the value of their taxable goods and/or taxable services exceeds the registration threshold within any 12-month period. 

The business-to-business (B2B) exemption and group relief are still permitted for certain newly taxable services to help reduce the impact of double taxation. The specified conditions for non-reviewable contracts are now available and those eligible will benefit from this until 30 June 2026. 

The exemption from being subject to compound, prosecution and penalty until 31 December 2025 does not apply to fraud offences or offences committed intentionally. 

Reference:

SST Expansion 2025 Updates, Crowe Malaysia PLT, 9 July 2025