Effective from 1 July 2025, the Malaysian government will implement a major reform of the Sales and Service Tax (SST) framework. This change stems from the Budget 2025 announcement on 18 October 2024, and aims to broaden the tax base, streamline the tax structure, and strengthen national fiscal stability—without placing excessive burden on the public.
This SST reform focuses on two key areas:
🔹 Sales Tax (CJ): Revisions to tax rates on selected goods
🔹 Service Tax (CP): Expansion to cover six additional service sectors
Key Updates to Sales Tax (CJ)
Items that remain 0% sales tax (no tax):
Chicken, fish, rice, milk, cooking oil, noodles, medicines, books, basic building materials, agricultural inputs, and other essential goods & industrial items.
Items with increased sales tax:
- From 0% to 5%: King crab, salmon, codfish, truffle, silk, imported fruits, essential oils, industrial machinery
- To 10%: Selected luxury goods like racing bicycles and antique hand-painted artwork
Service Tax (CP) Expansion: 6 Newly Taxable Sectors
From 1 July 2025, the service tax will apply to six new industries. Each sector will have its own tax rate, threshold, and exemptions.
1. Leasing & Rental Services
- Rate: 8%
- Threshold: RM500,000 annual turnover
- Exemptions: Residential property, Financial leasing, Leasing of tangible goods outside Malaysia , B2B & intra-group services , Non-reviewable contracts (12-month exemption period)
2. Construction Services
- Rate: 6%
- Threshold: RM1,500,000 annual turnover
- Exemptions: Residential and related infrastructure , B2B transactions , Non-reviewable contracts (12-month exemption)
3. Fee-Based Financial Services
- Rate: 8%
- Scope: Fees, commissions, charges
- Exemptions: Core banking services , Islamic finance profit/interest , Foreign exchange and capital markets , Remittance fees , Insurance and takaful agency services
4. Private Healthcare Services
- Rate: 6%
- Threshold: RM1,500,000
- Taxable: Non-Malaysians , Traditional and complementary medicine , Allied health services (e.g., physiotherapy)
- Exemption: Services provided to Malaysian citizens
5. Private Education Services
- Rate: 6%
- Taxable: Early childhood, primary, and secondary schools charging > RM60,000 per student per year & Higher education for non-Malaysians
- Exemption: Malaysian students and services for persons with disabilities (OKU)
6. Beauty Services
- Rate: 8%
- Threshold: RM500,000
- Examples: Facial treatments, hairdressing, beauty therapy
Government Support and Transition Measures
To help businesses adapt, especially micro, small, and medium enterprises (MSMEs), the government will offer the following support:
- A grace period until 31 December 2025 (no penalties during this time)
- Revenue thresholds that exempt smaller businesses from the new taxes
- Relief for B2B and intra-group services to avoid double taxation
- A 12-month exemption period for existing non-reviewable contracts
- Continued tax exemptions on basic goods, public healthcare, and education
**Last Updated on 09.06.2025
references from： Malaysia’s Major SST Reform in 2025: Service Tax Expansion & Sales Tax Adjustments – L & Co Accountants
