Selected non-essential goods in Malaysia will be subject to a revised sales tax rate of either 5% or 10% starting 1 July 2025, while essential goods will remain exempt. The Ministry of Finance has also confirmed that the scope of the service tax will be expanded to include several new categories, including leasing, construction, financial services, private healthcare, education, and beauty services.

These changes, first outlined during Budget 2025 last October, were reaffirmed today with further detail provided to clarify the government’s targeted approach. The review aims to broaden the tax base and enhance fiscal sustainability without burdening the majority of the population.

Second Finance Minister, Datuk Seri Amir Hamzah Azizan emphasised that the revised tax framework is designed to shield the public from unnecessary hardship, while still generating sufficient revenue to improve public services and support vulnerable groups.

“To ensure the majority of the people are not impacted by the sales and service tax review, the Madani government is adopting a targeted approach that exempts basic goods and essential services. This additional revenue will allow us to improve public services and expand direct cash aid, ensuring the benefits are returned to the people in a fair and equitable manner,” he said. 

To mitigate the impact of the revised framework, the government will introduce selected exemptions to avoid double taxation and ensure that key services for Malaysian citizens remain untaxed. Various forms of support will also be made available to micro, small, and medium enterprises (MSMEs) affected by the adjustments.

To ease the compliance burden, companies subject to the expanded Sales and Service Tax (SST) will not face prosecution or penalties for non-compliance until 31 December 2025, provided they are taking steps to fulfil the new legal requirements.

• TAGS:
• Budget 2025
• Customs Department
• Ministry of Finance
• MOF
• Sales and Service Tax
• SST
• Tax