Sales and Service Tax (SST)

If you have ever wondered why your restaurant bill carries a line for “SST” but your grocery receipt usually does not, you have run into the two very different halves of the same tax. Malaysia does not run a single broad-based consumption tax like GST or VAT. Instead it runs two narrower taxes — a Sales Tax on goods and a Service Tax on services — bundled together under the label SST and administered by the Royal Malaysian Customs Department (RMCD).

That design matters enormously for anyone in business. Whether you charge SST, at what rate, and whether you even have to register at all, depends on which of the two taxes catches you, what you sell, and how much of it. This guide walks through the mechanics as they stand after the major scope expansion that took effect on 1 July 2025.

What exactly is SST, and where did it come from?

SST is the successor to the Goods and Services Tax (GST). Malaysia introduced GST in April 2015, then abolished it and reinstated the older sales-and-service model on 1 September 2018. The legal foundations are two separate statutes — the Sales Tax Act 2018 and the Service Tax Act 2018 — supported by a suite of regulations and orders (such as the Sales Tax (Goods Exempted) Order and the Sales Tax (Person Exempted) Order). RMCD administers everything through its online MySST system, which went live on 6 August 2018.

The key conceptual point is that SST is single-stage, not multi-stage. GST was charged and reclaimed at every link in the supply chain; SST is charged once. Sales Tax is levied at the point of manufacture or import and is not recoverable further down the chain, and Service Tax is charged when a prescribed service is provided. There is no input-tax credit mechanism, which makes SST simpler to file but means the tax can cascade into final prices.

Sales Tax or Service Tax — which one applies to you?

The two taxes have different taxpayers, different rates, and different trigger points. Getting this distinction right is the first compliance decision any business makes.

Feature	Sales Tax	Service Tax
Legal basis	Sales Tax Act 2018	Service Tax Act 2018
What is taxed	Taxable goods manufactured locally or imported	Prescribed taxable services provided in Malaysia
Who charges it	Registered manufacturers; RMCD collects it on imports	Registered service providers
Rate	5%, 10%, or a specific rate	8% standard; 6% for certain groups
Stage	Charged once, at manufacture or import	Charged when the service is provided
Registration trigger	Manufacturing turnover over the threshold	Taxable-service turnover over the threshold

A single business can be liable for both. A furniture manufacturer that also rents out commercial warehouse space, for instance, could be a Sales Tax registrant on the furniture and a Service Tax registrant on the leasing — two registrations, two sets of returns, under one MySST account.

How much is SST — the rates in detail

Sales Tax is charged at 5%, 10%, or a specific rate, depending on the class of goods. Broadly, essential goods sit at 0% (exempt), many intermediate and semi-essential goods fall at 5%, and non-essential or discretionary goods fall at 10%. Certain goods (such as petroleum products) are taxed at a fixed specific rate per unit rather than a percentage. Following the 2025 revision, a range of previously untaxed goods — including selected imported fruits, industrial machinery, and various premium items — moved into the 5% or 10% bands, while locally grown produce and other basic necessities stayed exempt.

Service Tax is charged at 8% for most taxable services. A reduced 6% rate applies to a specific set of groups:

• Food and beverage services (restaurants, catering)
• Telecommunications services
• Provision of parking spaces
• Logistics services

There is also a distinct specific charge of RM25 per year on every principal and supplementary credit or charge card — a fixed levy rather than a percentage.

Service category	Service tax rate
Most taxable services (default)	8%
Food and beverage	6%
Telecommunications	6%
Parking spaces	6%
Logistics	6%
Credit / charge cards	RM25 per card per year

Who has to register — and at what threshold?

Registration is mandatory once your taxable turnover crosses the relevant threshold. RMCD applies a 12-month test that works two ways:

• Historical method — the value of taxable goods or services in the past 12 months has exceeded the threshold; or
• Future method — you reasonably expect the value in the next 12 months to exceed it.

Cross the line by either measure and you must register. Importantly, RMCD’s guidance is that turnover which happens to be exempt (for example B2B supplies or supplies to particular customers) is still counted toward the threshold — you look at the total value of taxable services, not just the portion that will ultimately be taxed.

The 1 July 2025 expansion introduced tiered thresholds so that smaller operators in newly taxed sectors are not immediately swept in:

Sector / service group	Registration threshold
General taxable services and manufacturers of taxable goods	RM500,000
Leasing / rental services (commercial)	RM1,000,000
Financial services	RM1,000,000
Private healthcare services	RM1,500,000
Construction services (non-residential)	RM1,500,000
Private education	Condition-based (e.g. fees above RM60,000 per student per year)

For Sales Tax, the registrant is the manufacturer of taxable goods whose annual turnover exceeds RM500,000. Some small manufacturing activities — tailors, jewellers, opticians and the like — are exempt from registration regardless of turnover. Importers do not “register” for Sales Tax the same way; the tax on imports is collected by RMCD at the point of entry.

Voluntary registration is available for businesses below the threshold that want to be inside the system — useful, for example, where being registered unlocks a B2B exemption on services you buy.

What did the 1 July 2025 expansion actually change?

The 2025 revision was the largest reshaping of SST since 2018, announced as part of the government’s fiscal-consolidation agenda under Budget 2025. It did two things at once: it widened the range of goods subject to Sales Tax, and — more significantly — it brought several new categories of services into the Service Tax net.

Newly taxable service areas include:

• Leasing and rental of commercial goods and premises — 8%, RM1,000,000 threshold
• Financial services (fee-based, brokerage, and similar) — 8%, RM1,000,000 threshold
• Construction of non-residential infrastructure and buildings — 6%, RM1,500,000 threshold
• Private healthcare — 6% on services to non-Malaysian (foreign) patients only; services to Malaysian citizens are exempt — RM1,500,000 threshold
• Private education — 6%, applying to private institutions whose fees exceed RM60,000 per student for each academic year (education provided to non-Malaysian citizens by higher-education institutions is taxable regardless of the threshold)

The RM1,000,000 threshold for the leasing/rental and financial-services groups was itself a late concession: it was raised from an initially proposed RM500,000 on 27 June 2025, just days before implementation, to keep smaller operators out of the net.

The government also built in transitional protections. A widely cited relief is that non-reviewable contracts entered into before the changes took effect were given a 12-month exemption running from 1 July 2025 to 30 June 2026, so that businesses locked into fixed-price agreements were not caught out mid-contract. Under the revised service tax policy amendments issued on 17 October 2025 (backdated to 1 July 2025), a non-reviewable contract qualifies for the exemption if it was made in writing and signed before 1 July 2025 and duly stamped with stamp duty by the Inland Revenue Board (LHDN) before 31 December 2025. The relief covers construction, rental/leasing and financial-services contracts. B2B exemptions and intra-group relief for leasing were also provided to prevent tax cascading within corporate groups.

Because the expansion landed suddenly, RMCD and the Ministry of Finance announced a penalty-free grace period until 31 December 2025: businesses making genuine efforts to comply would not be penalised for late registration, late filing, or documentation errors during the transition. That grace period has now ended, and full enforcement applies from 1 January 2026.

How do returns and payment work?

Once registered, the rhythm of compliance is straightforward but unforgiving on timing.

• Taxable period: two months.
• Return: the SST-02 return, filed through the MySST portal.
• Deadline: no later than the last day of the month following the end of the taxable period.
• Payment: due at the same time as the return.
• Nil returns: you must still file even if there is no tax payable for the period.

So a taxable period ending 31 August has its return and payment due by 30 September. Miss it, and the late-payment penalty escalates:

Period overdue	Penalty
First 30 days	10%
Days 31–60	Additional 15%
Days 61–90	Additional 15%
Beyond 90 days	Capped at 40% total

Filing and payment are done entirely online — there is no need to visit an RMCD office.

A quick decision framework

Work through these questions in order to place your business:

1. Do I manufacture taxable goods in Malaysia, or import them? If manufacturing turnover exceeds RM500,000, you are a Sales Tax registrant. Imports are taxed at entry regardless.
2. Do I provide any prescribed taxable service? Check your activity against the Service Tax groups — the list widened sharply on 1 July 2025.
3. Which threshold applies to that service? RM500,000 for general services; RM1,000,000 for leasing and financial services; RM1,500,000 for healthcare and construction.
4. Have I crossed it on either the historical or future 12-month test? If yes, registration is mandatory.
5. Am I close to the line, or do I buy taxable services myself? Consider voluntary registration and available B2B or group relief.
6. Which rate do I charge? 5%/10% for goods; 8% (or 6% for F&B, telecom, parking, logistics) for services.

When in doubt, the binding answer is always the specific guide for your industry on the MySST portal — RMCD publishes sector guides (digital services, logistics, healthcare, employment services, and more) that override general summaries.

Common mistakes to avoid

• Counting only the taxed portion toward the threshold. RMCD counts the total value of taxable services, including turnover that will end up exempt. Businesses that exclude exempt B2B revenue often register late.
• Assuming one registration covers both taxes. Sales Tax and Service Tax are separate registrations with separate returns, even under one MySST account.
• Treating SST like GST. There is no input-tax credit. You cannot reclaim SST you paid on your own purchases against SST you collect.
• Skipping the nil return. A period with no tax still requires a filed SST-02. Silence is a default, not an exemption.
• Reading pre-2025 guidance. Rates, groups and thresholds changed materially on 1 July 2025. Any list that shows a flat 6% service tax or omits the leasing, financial and construction groups is out of date.
• Assuming the grace period still runs. The penalty-free window closed on 31 December 2025; late filings from 2026 attract the full penalty schedule.

What’s next

If you think your business may have crossed a threshold, the practical next step is to open the MySST portal and check registration status and the specific industry guide for your activity — the guides are the authoritative source and are updated as orders change. Have your SSM company details and MyCoID to hand before you start the online application.

Because the 2025 expansion is still bedding in, expect further RMCD clarifications and amendment orders. Treat the rates and thresholds here as the current position, but verify any hard figure against the latest MySST guide before you rely on it for pricing, contracts or filings — and consult a licensed tax agent for edge cases such as mixed supplies, cross-border digital services, or intra-group relief.

For related obligations, see our guides on the Income Tax Act 1967 and the Companies Act 2016, which together with SST make up the core compliance stack for most Malaysian businesses.