Starting 1 July 2025, Malaysia’s Sales and Service Tax (SST) regime will reach deeper into supply chains, taxing a broader list of goods and, for the first time, a large swathe of services that previously fell outside the net. While the Government has granted a penalty-free grace period until 31 December 2025, most businesses have barely six months to get their systems, contracts and pricing ready. Below is a concise, practice-oriented briefing designed for in-house counsel, finance leaders and operational teams.
1. What exactly is changing?
Sales tax on goods – about 5,000 tariff lines move from zero-rated to 5 % or 10 % tax. Newly taxable items include:
- imported fruits
- premium seafood (king crab, salmon)
- essential oils; silk and other premium fabrics
- antique artwork
- racing bicycles
Essential staples (rice, books, school supplies, medicines and basic building materials) remain at 0%. Where goods are invoiced before 1 July but delivered later, the old rate still applies, provided documentation is complete.
Service tax – Six new service clusters join the 6 %–8 % regime:
- Construction works (6 %, RM1.5 m registration threshold)
- Rental / leasing of tangible assets, including commercial property (8 %, RM500k threshold)
- Fee-based financial services such as brokerage, underwriting and trade finance (8 %, RM500 k)
- Private healthcare, traditional and complementary medicine, and allied health (6 %, RM1.5 m, but only for non-Malaysian patients)
- Private education above RM60 000 per student per year and tertiary programmes for non-citizens (6 %, no threshold)
- Beauty, wellness and aesthetic services (8 %, RM500 k)
Imported taxable services (ITS) rules remain in force: Malaysian recipients must self-account for service tax on digital or consulting services procured from abroad, even when the foreign supplier is unregistered.
2. Key dates and thresholds
| Date |
Event |
| 1 July 2025 |
Expanded law in force; existing SST registrants must begin charging immediately
|
| 31 August 2025 |
Newly caught businesses must apply for a MySST registration number
|
| 1 September 2025 |
First day new registrants may lawfully charge SST once approved
|
| 1 July 2025 – 31 December 2025 |
Penalty-free grace period: Customs will waive fines for late registra-tion or minor filing errors if “reasonable efforts” to comply are shown
|
3. Transitional and sector-specific reliefs
Several particular rules apply:
- Non-reviewable contracts signed before 1 July receive a 12-month exemption for construction and rental / leasing services – critical for long-term EPC, fit-out and commercial lease agreements.
- B2B exemptions – Sub-leasing, sub-contract construction work and intra-group rental may qualify for relief if documentation proves the onward taxable use.
- MSME tenants – Commercial leases to micro, small and medium enterprises with turnover below RM500 000 are exempt from the 8 % leasing tax.
4. Five action steps for every business
The new rules will enter into force within two weeks from the publication of this write-up. There isn’t much time left, yet five crucial steps should be taken to ensure a seamless transitioning and full compliance with the new tax regime:
- Map your exposure: if you aren’t already clear about this, list every good and service sold or purchased, match them to the updated HS codes and service tax groups and quantify the revenue at risk.
- Register strategically: small companies should monitor rolling-12-month turnover against the new RM500 000 / RM1.5 m thresholds. Early registration avoids billing disruptions, but over-registration ties up working capital in tax payments.
- Update your contracts: if your contracts don’t have them yet, make sure to insert SST clauses allocating the tax burden, address price-gross-up mechanics and invoke the 12-month relief for existing fixed-price contracts where available.
- Re-configure your systems: adapt ERP, POS and e-invoice settings to the new 5%, 6%, 8% and 10% rates; set up separate tax codes for exempt Malaysian-citizen healthcare and intra-group B2B supplies.
- Communicate early: notify customers and suppliers of price changes, update quotations and purchase orders and train client-facing staff to handle SST queries. Keep in mind that proper communication often avoids delays and even disputes in the first place.
Lastly, as is often the case when new rules and regulations are implemented in Malaysia, there is a grace period for compliance. However, it is crucial to recall that companies, which haven’t taken any steps towards compliance, are very unlikely to benefit from any advantages. At the very minimum, the most basic steps must be evidenced.
5. How Aqran Vijandran can help
We at Aqran Vijandran regularly assist clients from Malaysia and abroad on tax matters. With respect to the changes to the SST regimes, we can particularly support you with the following:
- End-to-end SST impact assessments: identifying taxable streams and optimal registration strategy.
- Contract re-drafting and negotiation support: ensuring tax clauses, price adjustment provisions and relief claims hold up to Customs scrutiny.
- Systems readiness checks: working with your finance and IT teams to map SST codes into ERP and e-invoice workflows.
- Training and rapid-response helpline: if your teams require advice during the grace period and beyond, we are there to support.
To discuss an SST game-plan tailored to your business, contact us here for an initial, obligation-free consultation.
Early, well-documented action is the best defence against unexpected assessments once the grace period ends. The expanded SST will be a permanent cost of doing business in Malaysia; treating the next six months as a live testing window will ensure you are fully compliant – and competitively ready – when full enforcement begins on 1 January 2026.
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