Sales Tax rate revision, Service Tax scope expansion to be effective
PUTRAJAYA: The government will implement a revision of the Sales Tax rates and an expansion of the Service Tax's scope effective from July 1, 2025, in order to strengthen the country's fiscal position by increasing revenue and broadening the tax base.
Finance Minister II Datuk Seri Amir Hamzah Azizan said these measures are aimed at improving the quality of the social safety net without burdening the majority of Malaysians.
'The government is committed to continuing the reforms under the MADANI Economy framework. To ensure that the majority of people are not affected by the Sales and Service Tax (SST) revision, the MADANI government is taking a targeted approach to ensure that basic goods and services are not taxed.
'In addition, various facilities are also being provided to mitigate the impact on micro, small, and medium enterprises (MSMEs),' he said in a statement today.
Amir Hamzah said that complementing the MADANI Government's efforts to stimulate the economy and strengthen the social safety net, the additional revenue from the SST enhancements will go towards further public service improvements.
These include increasing the amount of cash assistance to the people, as well as strengthening basic infrastructure and the delivery of public services.
'This additional revenue can benefit the entire country without raising the burden on the majority of the people,' he said.
Amir Hamzah said the SST review has undergone the process of engagement with stakeholders, particularly industry associations and tax agents.
'Legal preparations also took into account feedback and input from the industry to ensure that the majority of the people are not affected and the impact on the industry is minimised,' the minister said.
According to the statement, the Sales Tax rate will remain unchanged for essential goods consumed by the people, while a rate of either five or 10 per cent will be imposed on non-essential or discretionary goods.
The scope of the Service Tax will be extended to include new services such as rental or leasing, construction, finance, private healthcare, education, and beauty services.
This expansion is accompanied by selective exemptions to avoid double taxation and to ensure that certain essential services for Malaysian citizens are not taxed.
Amir Hamzah said the government has also taken into account the need for legal compliance by companies that are subject to the SST.
'In line with that, for companies that take steps to comply with the SST legal requirements, no legal action or penalty will be imposed up to Dec 31, 2025,' he said.
Under the Sales Tax revision, the MADANI Government is maintaining a rate of zero per cent on essential daily goods such as rice, chicken, beef, fish, vegetables, sugar, cooking oil, medicine, books, newspapers and pet food, as well as basic construction materials and agricultural inputs such as fertilisers, pesticides and machinery.
This approach is aimed at ensuring that there is no direct impact on the cost of living for the majority of people and inflation rates remain manageable.
Meanwhile, a five per cent Sales Tax is imposed on selected discretionary items such as king crab, salmon, cod, imported fruits, essential oils, and silk fabrics, while premium items such as racing bicycles and antique hand-painted artworks are subject to a rate of 10 per cent.
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