Kuala lumpur:<Text>

Service Tax on rentals for micro, small and medium enterprises (MSMEs) has been reduced to six per cent from eight per cent, said Prime Minister Datuk Seri Anwar Ibrahim. The eight per cent tax was implemented on July 1, 2025, and applies to the rental of non-residential premises such as offices, warehouses, and commercial assets.

According to BERNAMA News Agency, the Service Tax on rentals has been a concern since its increase from zero to eight per cent. Prime Minister Anwar expressed his commitment to address this issue by reducing it to six per cent, despite an anticipated annual revenue loss of nearly half a billion ringgit. In his New Year's address, Anwar, who also serves as the Finance Minister, announced a one-year deferment of the Service Tax on rentals for newly established MSMEs.

The government has also revised the tax exemption threshold for MSMEs to include those with an annual turnover of up to RM1.5 million. Previously, tax exemptions were limited to businesses with annual sales between RM500,000 and RM1 million. Anwar stated that the exemption has been extended to cover MSMEs with annual sales up to RM1.5 million.

Furthermore, the government has introduced sales tax exemptions on raw materials or critical inputs used by registered manufacturers, particularly for goods related to the livestock and agricultural sectors. This measure aims to control the prices of essential goods for the public, covering items such as animal feed, fertilisers, and pesticides, to ensure stability in production costs and the national food supply chain.

The Ministry of Finance has also extended the Service Tax exemption for construction contracts signed before July 1, 2025, without a review clause, until June 30, 2027. This extension allows the affected construction contracts to benefit from a two-year Service Tax exemption from the implementation of the expanded Sales and Service Tax (SST).

In add ition, construction services for places of worship, including surau, mosques, temples, churches, and shrines, will be exempt from Service Tax effective July 1, 2025, further supporting religious and spiritual infrastructure development.