Expanded SST In July 2025, List Of New Categories Added
The government has recently announced that it will be expanding the Sales and Service Tax (SST) in order to make the system more targeted and fair, putting more focus on those who spend more on non-essential goods and services.
The SST was originally reintroduced in 2018, replacing the former Goods and Services Tax (GST) system. SST comprises two separate taxes: Sales Tax and Service Tax. Sales Tax is applicable to taxable goods either manufactured in or imported into Malaysia, while Service Tax is levied on specific services provided by businesses in Malaysia.
Announced by Prime Minister Datuk Seri Anwar Ibrahim during the tabling of Budget 2025 in October last year, the implementation of the proposed tax expansion was initially set for 1 May, but the changes were only gazetted on 9 June. According to a statement released by the Ministry of Finance, some of the changes are as follows:
1. Additional services taxed
Six new categories of services will be subject to the service tax. These include leasing and rental, construction, finance, private healthcare, education, and beauty services. Tax rate will vary between 6% and 8% with thresholds and exemptions in place to safeguard lower-income groups and small businesses.
2. Essentials will remain tax-free
Basic essential goods such as rice, cooking oils, sugar, milk, medicines, books and even building materials such as cement and sand will remain under the zero percent sales tax margin. Everyday needs will not cost more as a result of the new SST changes.
3. Higher luxury costs
On the other hand, imported goods such as fruits, king crab, truffle mushrooms, silk fabric, racing bikes and antique paintings will now be taxed at 5% or 10%, depending on the item. These are all considered non-essential goods and luxury goods.
4. Tax rate of new service categories
As mentioned previously, several new service categories are being taxed. Here are the details:
Leasing and rental: Taxed at 8% if annual income exceeds RM500,000. But residential rentals and small businesses are exempt.
Construction: Taxed at 6% for contracts above RM1.5 million. Public housing and residential buildings are exempt.
Finance: Fee-based services taxed at 8%, but basic banking, Islamic finance and remittances are not affected.
Private healthcare: Only non-citizens will pay a 6% tax. Malaysians are exempt, including for traditional medicine like Chinese, Malay and Indian therapies.
Education: A 6% tax applies to private schools charging over RM60,000 per student annually and higher education for international students. Malaysians and persons with disabilities are exempt.
Beauty services: Taxed at 8% if a business earns over RM500,000 a year. This includes facial treatments and hair salons.
5. Grace period for businesses
No penalties or enforcement until 32 December 2025, giving businesses time to adapt.
