Kuala Lumpur: The government will implement a targeted revision of the Sales Tax rates and expansion of the Service Tax’s scope effective from July 1, 2025, to strengthen the country’s fiscal position by increasing revenue and broadening the tax base. Finance Minister II Datuk Seri Amir Hamzah Azizan stated that these measures aim to improve the quality of the social safety net without burdening the majority of Malaysians.
According to BERNAMA News Agency, the government is committed to continuing the reforms under the MADANI Economy framework. To ensure that the majority of people are not affected by the Sales and Service Tax (SST) revision, the MADANI government is taking a targeted approach to ensure that basic goods and services are not taxed. Additionally, various facilities are being provided to mitigate the impact on micro, small, and medium enterprises (MSMEs).
Amir Hamzah noted that the additional revenue from the SST enhancements will complement the MADANI Government’s efforts to stimulate the economy and strengthen the social safety net. This revenue will be directed towards public service improvements, including increasing cash assistance to the people and strengthening basic infrastructure and public service delivery.
The SST review has undergone engagement with stakeholders, particularly industry associations and tax agents. Legal preparations have considered feedback and input from the industry to minimize the impact on the industry and ensure that the majority of the people are not affected.
According to the statement, the Sales Tax rate will remain unchanged for essential goods consumed by the people, while a rate of either five or 10 percent will be imposed on non-essential or discretionary goods. The scope of the Service Tax will be extended to include new services such as rental or leasing, construction, finance, private healthcare, education, and beauty services. Selective exemptions will accompany this expansion to avoid double taxation and ensure that certain essential services for Malaysian citizens are not taxed.
Amir Hamzah emphasized the government’s consideration for legal compliance by companies subject to the SST. For companies taking steps to comply with SST legal requirements, no legal action or penalty will be imposed up to December 31, 2025.
Under the Sales Tax revision, the MADANI Government is maintaining a rate of zero percent on essential daily goods such as rice, chicken, beef, fish, vegetables, sugar, cooking oil, medicine, books, newspapers, and pet food, as well as basic construction materials and agricultural inputs such as fertilizers, pesticides, and machinery. This approach aims to prevent a direct impact on the cost of living for the majority of people and keep inflation rates manageable.
Meanwhile, a five percent Sales Tax will be imposed on selected discretionary items such as king crab, salmon, cod, imported fruits, essential oils, and silk fabrics, while premium items such as racing bicycles and antique hand-painted artworks will be subject to a rate of 10 percent.