Excise Duty in Malaysia: Cars, Alcohol, Cigarettes and Sugary Drinks

Buy a car in Malaysia and you may end up paying tax that nearly equals the price of the car itself. The main culprit is a tax that is rarely discussed but extremely powerful: excise duty.

Excise duty is a domestic tax imposed on selected goods considered luxury, unhealthy, or potentially burdensome to the public healthcare system. It is not a general tax like Sales Tax — it targets only a handful of categories: motor vehicles, liquor, cigarettes and vapes, sugary drinks, premix preparations, and playing cards and mahjong tiles.

What is excise duty and who collects it?

Excise duty is provided for under the Excise Act 1976 and enforced by the Royal Malaysian Customs Department (RMCD). Unlike import duty, which is imposed at the border, excise duty is imposed on goods manufactured domestically as well as those imported.

In general, excise duty becomes chargeable when goods are manufactured, and payable when the goods leave the licensed manufacturer’s premises — or at the time of importation for goods from abroad. For this reason, manufacturers of excise goods such as breweries or vehicle assemblers must hold an excise licence and keep their goods under customs control until the duty is settled.

Duty rates are calculated in two forms:

• Ad valorem — a percentage of the value of the goods (for example 75% for small cars).
• Specific — a fixed amount per unit (for example 90 sen per litre of sugary drinks, or 47 sen per 100 grams of premix preparations).

Some goods such as hard liquor use a composite rate — a combination of a fixed rate and a percentage.

How much is the excise duty on cars?

Motor vehicles are the largest source of excise duty in Malaysia, and the main reason car prices here are high. For passenger cars (saloons), excise duty is calculated on an ad valorem basis according to engine capacity:

Engine capacity	Excise duty rate (passenger cars)
Below 1,800cc	75%
1,800–1,999cc	80%
2,000–2,499cc	90%
2,500cc and above	105%

The rate schedule above is documented for locally assembled cars (CKD, completely knocked-down). Fully imported cars (CBU, completely built-up) bear the same excise rate — the difference is that CBU cars are also charged import duty on top. All rates are calculated on the duty-paid value.

What makes cars expensive is the stacking effect of three layers of tax. For a CBU car imported from outside ASEAN, the sequence is as follows:

1. Import duty is imposed first — 30% for CBU cars from outside ASEAN (cars from ASEAN countries enjoy 0% under the ASEAN agreement). This rate depends on free-trade agreements; for example, certain electric vehicles from China enjoy an import rate as low as 5% under ACFTA.
2. Excise duty is calculated on the duty-paid value (that is, the base price plus import duty).
3. Sales tax of 10% is imposed last, on top of the amount that already includes excise.

Because each layer is calculated on top of an amount already inflated by the previous layer, an imported car can end up costing more than double its original price. By contrast, CKD cars assembled domestically are usually exempt from import duty on their components, so they bear only excise and sales tax — which is why locally made cars are cheaper.

How much is the excise duty on alcohol and cigarettes?

Alcohol and tobacco are classic excise goods — “sin taxes” that raise prices while helping to fund public-health costs. Below are some rates for guidance (absolute figures for certain liquor and tobacco should be checked with RMCD):

Product	Excise duty rate
Beer / stout	RM175.00 per litre (100% volume) + 15% ad valorem (composite)
Wine	RM450 per litre
Hard liquor / spirits	RM1.10 per litre + 15% (composite)
Vodka	RM150 per litre (100% volume)
Sake	RM60 per litre (100% volume)
Cigarettes	RM0.42 per stick (effective 1 November 2025)
Cigars / cheroots / cigarillos	RM440 per kilogram
Heated tobacco products	RM798 per kilogram
Chewing tobacco	5% + RM27 per kilogram

Through Budget 2026, several rates were raised effective 1 November 2025: cigarettes rose 2 sen per stick (from RM0.40 to RM0.42), alcohol excise duty was raised 10% across the board, heated tobacco products rose RM20 per kilogram, and cigars rose RM40 per kilogram. Chewing tobacco, meanwhile, was introduced as a new excise category through Budget 2024.

What about the sugary drinks tax?

The excise duty on sugar-sweetened beverages (SSB) is among the youngest excise taxes in Malaysia, introduced on 1 July 2019 as part of the Ministry of Health’s “War Against Sugar” effort. The threshold differs by category rather than being a single uniform one: ready-to-drink beverages under HS 2202 are dutiable if they exceed 5 grams of sugar per 100ml; milk-based drinks (also HS 2202) if they exceed 7 grams of sugar per 100ml; and fruit or vegetable juices under HS 2009 if they exceed 12 grams of sugar per 100ml.

The rate was raised twice in succession:

Effective date	Rate
1 July 2019	40 sen per litre
1 January 2024	50 sen per litre
1 January 2025	90 sen per litre

The increase to 90 sen per litre — an 80% jump from 50 sen — was announced in Budget 2025. The effect was quite significant: the government collected RM73.81 million in SSB excise duty between January and November 2025 alone, contributing to total collections of RM521.35 million since the tax began in 2019. Of the 2025 collection, RM25 million was channelled to the Ministry of Health for advocacy programmes, SGLT-2 medication for diabetic patients, and peritoneal dialysis facilities for end-stage kidney patients.

Besides sugary drinks, premix preparations such as 3-in-1 instant coffee and tea are also charged excise duty of 47 sen per 100 grams, effective 1 March 2024 under the Excise Duties (Amendment) Order 2024.

Other goods subject to excise duty

The list of excise goods is longer than one might expect. Besides cars, alcohol, cigarettes and sugary drinks, the following categories are also subject to it:

• Other vehicles — motorcycles, mopeds (20%), and all-terrain vehicles/ATVs (65%).
• Sparkling wine — RM450 per litre (100% volume).
• Playing cards — 10% ad valorem.
• Mahjong tiles — 10% ad valorem.

Gambling goods such as playing cards and mahjong tiles remain on the excise list for historical and social reasons, even though their collection is small compared with cars and tobacco.

What’s next

Excise duty makes up a large part of the price you pay for cars, liquor, cigarettes and sweet drinks — and the rates are frequently amended during the annual budget presentation in October. Before buying a high-value item such as an imported car, check the current rates on the official RMCD website, as figures can change from year to year.

For a thorough understanding of taxes in Malaysia, also read our articles on Sales and Service Tax (SST) and import duty, as all three often stack on the same goods. For manufacturers and importers, refer to the Royal Malaysian Customs Department for excise licensing and compliance requirements.

Note: This article is an AI-generated draft and has not been reviewed by a tax expert. Rates and effective dates may change — verify current figures with official sources before making financial decisions.