Expanded SST to cover more services from July 1, essentials remain tax-free

New Straits Times

2 days ago

PUTRAJAYA: The expanded Sales and Service Tax (SST), which will come into effect on July 1, will cover six new categories of services namely leasing, construction, finance, private healthcare, education and beauty.
Finance Minister II Datuk Seri Amir Hamzah Azizan said the changes also include higher sales tax rates on selected luxury goods such as king crab, truffle mushrooms, essential oils, imported fruits and racing bicycles.
However, essential goods including rice, sugar, milk, cooking oil, medicines and basic construction materials will remain exempt under the zero per cent sales tax bracket.
Amir Hamzah Azizan said the revamped SST structure is aimed at strengthening government revenue without imposing additional burdens on the majority of citizens.
"The government is committed to pursuing reforms under the Madani economic framework," he said in a statement today, following a closed-door editors' briefing held here earlier.
"To ensure the majority of people are not affected by the SST review, the government has adopted a targeted approach by exempting essential goods and services from taxation," he added.
Amir Hamzah added that the extra revenue collected would be channeled towards improving public services and expanding the social safety net.
"This improvement to SST will enable further upgrades in public services, especially increasing the amount of direct financial aid to the people, while also strengthening public infrastructure.
"The additional revenue can benefit the entire country without adding pressure on the majority of citizens."
Under the expanded scope, service tax will now apply to leasing services at a rate of eight per cent for companies with annual leasing revenue above RM500,000.
However, leases involving residential buildings, reading materials, overseas assets, and certain financial leases will be exempt.
Smaller businesses, particularly micro, small and medium enterprises, will also be excluded if their annual leasing revenue falls below the threshold.
For construction services, a six per cent service tax will apply to providers with annual revenue exceeding RM1.5 million.
Residential construction and public housing-related works are exempt and exemptions also apply to business-to-business (B2B) transactions to avoid double taxation.
Financial services that involve fees or commissions will be taxed at eight per cent. Basic financial services such as standard banking transactions, Islamic financing mechanisms, foreign exchange gains, outbound money transfers, and services tied to capital markets, will remain exempt.
Amir Hamzah said the government has also provided relief for transactions involving Bursa Malaysia, Labuan-based services and B2B dealings.
Private healthcare services for non-citizens will be taxed at six per cent. Malaysians will remain exempt, including for traditional treatments like Malay, Chinese, Indian, Islamic medicine, homeopathy, chiropractic and osteopathy.
The government has also confirmed that allied health services such as physiotherapy, audiology and speech therapy will remain exempt for Malaysians.
In the education sector, a six per cent tax will be imposed on private preschools, primary and secondary schools that charge more than RM60,000 in annual fees per student.
However, students who are Malaysian citizens, as well as persons with disabilities, will not be taxed. In the case of higher education, the tax applies only to international students, while Malaysian students are fully exempt.
Beauty services, including facial treatments and hairdressing, will be taxed at eight per cent if the value of taxable services provided by a business exceeds RM500,000 within 12 months.
To support a smooth transition, the government will not take legal or punitive action against companies that comply with the new rules until Dec 31, 2025.
The Finance Ministry and the Customs Department will issue detailed regulations, guidelines, and frequently asked questions (FAQs) in the coming weeks to assist businesses in navigating the updated tax regime.