KUALA LUMPUR, June 9 (Bernama) -- The Ministry of Finance has issued a statement on the implementation of revised Sales Tax (ST) rates and expanded scope of the Service Tax effective July 1, 2025. The aim is to strengthen the country’s fiscal position by increasing revenue and broadening the tax base.
1. Sales Tax
i. Under the revised Sales Tax (ST) structure, essential daily goods remain taxed at zero per cent. These include chicken, beef, mutton, fish, prawns, squid, local vegetables and fruits, rice, barley, oats, wheat, flour, canned sardines, sugar, salt, white bread, pasta, vermicelli, noodles, instant noodles, milk, cooking oil, medicine, medical devices, books, journals, newspapers and pet food.
The zero per cent rate is also maintained for key construction materials (cement, stones, sand) and agricultural inputs such as fertilisers, pesticides, and agricultural and livestock machinery.
ii. The MADANI Government is maintaining zero ST on essential daily items to avoid direct impact on the cost of living for most citizens and to keep inflation in check.
iii. Selected non-essential goods will now be taxed at five (5) per cent, up from zero, including king crab, salmon, cod, truffle mushrooms, imported fruits, essential oils, silk fabrics and industrial machinery.
iv. Premium discretionary goods such as racing bicycles and antique hand-painted artworks will be taxed at 10 per cent.
2. Service Tax
Under the expanded Service Tax scope, six new service categories will be included: leasing or rental, construction, financial services, private healthcare, education and beauty services.
i. Leasing or rental services
An eight (8) per cent Service Tax will apply to service providers with annual rental or leasing income exceeding RM500,000. The MADANI Government will provide exemptions for:
a) Residential property rentals, reading materials, financial leases and tangible assets located outside Malaysia;
b) Micro, small and medium enterprises (MSMEs) with annual turnover below RM500,000;
c) Business-to-business (B2B) transactions and group relief to prevent double taxation;
d) Non-reviewable contracts, which are granted a 12-month exemption from the effective date.
ii. Construction services
A six (6) per cent Service Tax will apply to providers with revenue exceeding RM1.5 million. Special measures include:
a) A higher RM1.5 million threshold to ease compliance for smaller contractors;
b) Service Tax exemption for residential buildings and public amenities;
c) B2B exemptions to avoid double taxation;
d) Non-reviewable contracts granted a 12-month exemption.
iii. Financial services
An eight (8) per cent Service Tax will be applied to fee- or commission-based services. Exemptions include:
a) Basic financial services such as basic banking and interest- or profit-based Islamic financing;
b) Foreign exchange and capital market gains, punitive charges, outward remittances, export-linked financing, fees to overseas remittance agents for inbound transfers, and brokerage/underwriting for life, medical and family takaful/insurance;
c) B2B exemptions, shariah-compliant services and services provided for Bursa Malaysia and Labuan.
iv. Private healthcare services
A six (6) per cent Service Tax will apply to non-citizens using private healthcare, traditional and complementary medicine, and allied health services, provided by companies with turnover exceeding RM1.5 million.
The MADANI Government provides:
a) Service Tax exemption for Malaysians receiving public or private healthcare, including traditional medicine (Malay, Chinese, Indian, Islamic), homeopathy, chiropractic and osteopathy;
b) Service Tax exemption for allied health services (e.g. physiotherapy, audiology, speech therapy) to reduce costs and improve access;
c) A reduced six (6) per cent rate for non-citizens;
d) A higher threshold of RM1.5 million to reduce compliance burden for small and medium-sized clinics.
v. Education services
A six (6) per cent Service Tax will be applied as follows:
a) Private pre-school, primary and secondary education with annual fees exceeding RM60,000 per student;
b) The MADANI Government views this as a targeted measure affecting high-value institutions, with limited impact. Malaysian citizens with disabilities will be exempt;
c) Higher education institutions will only be taxed on fees charged to non-citizens. There will be no Service Tax on Malaysian citizens pursuing higher education.
vi. Beauty services
An eight (8) per cent Service Tax will apply to service providers with taxable services exceeding RM500,000 over 12 months. Examples include facial treatments and hairdressing.
In line with the expansion of Service Tax scope, legal notification and gazettement will give industry players time to assess whether:
i. Their business operations fall within the taxable scope;
ii. Their service value exceeds the 12-month threshold;
iii. They need to seek advice from the Royal Malaysian Customs Department on registration, business model adjustments, training, and documentation.
-- BERNAMA
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