SST expands from July, but essentials stay tax-free

Malaysian Reserve

3 days ago

by AUFA MARDHIAH
STARTING July 1, 2025, the government will expand the Sales and Service Tax (SST) to include more luxury goods and service sectors — but essential items and key services for Malaysians will remain tax-free.
'To ensure the majority of the people are not affected by the SST review, the MADANI Government is taking a targeted approach to ensure basic goods and services are not taxed.
'In addition, various facilities are also provided to reduce the impact on micro, small and medium enterprises (MSMEs),' said the Finance Minister 2, Datuk Seri Amir Hamzah Azizan (picture), in a statement.
The move is part of efforts to strengthen the country's finances without raising the cost of living for most people.
Under the updated rules, essential goods like rice, vegetables, cooking oil, medicine, books, pet food, cement, sand, and farming supplies will continue to be exempt from sales tax. According to the ministry, this is to protect the cost of living and keep inflation under control.
However, some non-essential and luxury items will now be taxed. A 5% sales tax will apply to things like king crab, truffle mushrooms, imported fruits, essential oils, silk fabrics, and industrial machinery. Premium items such as racing bicycles and antique artwork will be taxed at 10%.
The service tax will also be extended to six new sectors — rental and leasing, construction, financial services, private healthcare, education, and beauty services. The tax rates will range from 6% to 8%, depending on the type of service and revenue earned.
For rental and leasing services, an 8% tax will be charged only if the company earns more than RM500,000 a year. Exemptions include residential property rentals, reading materials, overseas leasing, and MSMEs earning below the threshold.
Construction services will face a 6% tax if the provider earns over RM1.5 million a year. Housing projects and public facilities are exempt, and B2B transactions may also qualify for relief to avoid double taxation.
In finance, only services with fees or commissions will be taxed at 8%. Basic services like savings accounts, interest charges, and Islamic financing will remain tax-free. Other exemptions include forex gains, remittances, and life or medical insurance brokerage.
Private healthcare will only be taxed for non-Malaysians at a 6% rate. Malaysians will remain exempt from both public and private healthcare costs, including traditional treatments and allied health services such as physiotherapy, audiology, and speech therapy.
In education, private schools that charge more than RM60,000 per student per year will be taxed. However, Malaysian students in all education levels will not be affected. Special exemption will also be given to students with disabilities.
Beauty services like facials and hairstyling will be taxed at 8%, but only if the business earns more than RM500,000 annually.
The government will give companies time to adjust and has promised no penalties for non-compliance until the end of 2025.
'The additional revenue from this improved SST will support further enhancements in public services, particularly in expanding cash assistance to the people and improving infrastructure and service delivery nationwide,' he said further.
Businesses are encouraged to check if they fall under the new tax rules and to consult the Royal Malaysian Customs Department for guidance.
The measure forms part of the government's broader MADANI economic framework aimed at strengthening Malaysia's social safety net and promoting targeted taxation without increasing the cost of living for the general public.