# Sales Tax in Malaysia — Rates, Mechanics and Exemptions

> How manufacturer-level sales tax works after the 1 July 2025 rate revision, and how the Schedule A, B and C exemption facilities that replaced CJ5 and CJ5A actually operate.

- Category: taxation
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/taxation/sales-tax-explained

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If your consultant has told you to file a CJ5 to buy raw materials tax-free,
they are quoting a form that was abolished in 2018. CJ5, CJ5A and CJ5B were
certificates under the Sales Tax Act 1972. Under the Sales Tax Act 2018 the
equivalent facility is **Schedule C** of the Sales Tax (Persons Exempted from
Payment of Tax) Order 2018, and RMCD's own FAQ says so in terms.

That is not a pedantic point. The Schedule C items do not map cleanly onto the
old forms, and the two most commonly confused — the trader facility and the
subcontract facility — are entirely separate items with different conditions.

## How sales tax actually works

Sales tax is **single-stage**. It is charged once, by a registered manufacturer
when it sells, or at the point of import. When a wholesaler resells to a
retailer, and the retailer to a customer, no further sales tax arises — the tax
is already embedded in the price.

That is the whole architecture, and it is why there is no input tax credit.
There is nothing to credit, because the tax is only imposed once. Businesses
still running GST-era mental models look for a recovery mechanism that does not
exist.

Two consequences follow. First, a manufacturer that buys taxed inputs and makes
taxable output would suffer tax twice — which is what the Schedule C facility
exists to prevent. Second, a business that is *not* a registered manufacturer
simply absorbs sales tax as a cost.

## What are the current sales tax rates?

The governing instrument is the **Sales Tax (Rate of Sales Tax) Order 2025,
P.U.(A) 170/2025**, in force 1 July 2025, which revoked the 2022 order.

Paragraph 2(1) fixes the rate at **ten per cent on all taxable goods**, except
goods included in an exemption order under s.35 and non-commercial goods in a
traveller's baggage. That baggage relief does not extend to motor vehicles,
alcoholic beverages, spirits, cigarettes, tobacco products, smoking pipes,
electronic cigarettes or vaping preparations.

Paragraph 2(3) then creates two schedules:

| Schedule | Rate |
| --- | --- |
| First Schedule | 5% |
| Second Schedule | Specific rates in column (4) |

The Second Schedule is the one people forget:

| Goods | Rate |
| --- | --- |
| Motor spirit (petrol), leaded and unleaded | RM0.60 per litre |
| Automotive diesel and other diesel fuels | RM0.40 per litre |
| Benzol (benzene) | RM0.30 per litre |
| Other petroleum spirit, flash point below 23°C | RM0.30 per litre |
| Aviation spirit, white spirit, solvent spirits, alpha olefins | RM0.01 per litre |
| Liquefied natural gas | RM0.01 per kilogram |

**There is no 0% rate.** Customs infographics label some goods as *Barangan
Berkadar 0%*, but the legal mechanism is **exemption** under s.35, effected by
the Sales Tax (Goods Exempted from Sales Tax) Order 2025. The distinction is
not cosmetic: a manufacturer whose output is exempt is not a manufacturer of
taxable goods, so it cannot register, and therefore cannot use Schedule C. It
needs Schedule B instead.

**The 1 July 2025 position has already moved.** P.U.(A) 199/2025 and 200/2025,
both made on 30 June 2025, pulled imported dates, oranges, mandarins and apples
back out of the 5% list and into the exempt schedule, along with containers,
swine and prawn feed, large plastic tanks, steel grill, aircraft, ships and
yachts. Then on 1 November 2025 a further pair of orders moved soya beans to
exempt, moved sunflower seeds into the 5% list, and rebased the whole
nomenclature onto the **Customs Duties Order 2025**. Any tariff code you cite
must be read against the 2025 nomenclature.

## Who has to register?

The threshold is **RM500,000** of taxable goods manufactured in a twelve-month
period, set by the Sales Tax (Total Sale Value of Taxable Goods) Order 2018 and
unchanged in 2025. RMCD's registration guide dated 6 March 2026 still states it.

Two points that trip people up:

- The test is on **goods you manufacture**, not total turnover. A trading
  company with RM50 million of revenue and no manufacturing does not register.
- **Importers do not register** for sales tax. Import sales tax is collected at
  customs clearance, not through a return.

Sub-contract manufacturers test the **value of work performed**. And some
manufacturers are exempt from registration whatever their turnover under the
Sales Tax (Exemption from Registration) Order 2018 — ready-mixed concrete,
preparation of meals, photocopying, engraving, photo developing, tarred road
preparations and the incorporation of goods into buildings.

## The exemption facilities: Schedules A, B and C

The Sales Tax (Persons Exempted from Payment of Tax) Order 2018 exempts persons
in column (2) from paying sales tax on goods in column (3), subject to
conditions in column (4). Column (5) names who signs the certificate.

**Schedule A — classes of person.** The Yang di-Pertuan Agong, Rulers and
Yang di-Pertua Negeri, federal and state government departments, local
authorities, inland clearance depots and duty-free shops, plus a set of
industrial items including machinery, equipment and spare parts.

**Schedule B — manufacturers of non-taxable goods.** Approved by the Director
General, covering controlled articles under the Control of Supplies Act 1961,
pharmaceutical products, milk products, and taxable raw materials used to
manufacture exempted goods for export, subject to a twelve-month export
condition.

**Schedule C — registered manufacturers.** This is the CJ5 replacement, and it
has five items:

| Item | Who | What |
| --- | --- | --- |
| 1 | Any registered manufacturer | Raw materials, components and packaging materials, excluding petroleum |
| 2 | Registered manufacturer of petroleum product | Same, including petroleum used as raw material |
| 3 | Person acting on behalf of a registered manufacturer | Raw materials, components and packaging, excluding petroleum |
| 4 | Person acting on behalf of a registered manufacturer of petroleum product | As above, including petroleum |
| 5 | Any registered manufacturer | Semi-finished or finished taxable goods returned after completion of subcontract work |

The conditions common to items 1 to 4 are strict: the goods must be approved by
the Director General, imported or purchased from another registered
manufacturer, a licensed warehouse under s.65 of the Customs Act 1967 or a
licensed manufacturing warehouse under s.65A, used **solely** in manufacturing,
and the manufacturer *shall pay the sales tax on any goods that cannot be
accounted for*. Items 3 and 4 add that the agent itself must be approved.

**Items 3 and 4 are the trader facility** — the MySST portal labels the sign-up
"Schedule C3 and C4 (Trader)". **Item 5 is the subcontract facility.** Treating
them as interchangeable, which a lot of secondary guidance does, will get an
application rejected.

Applications go through the non-registrant module of the MySST portal, with
Lampiran templates published on the RMCD exemption page.

## There is no small-manufacturer facility

Worth stating plainly, because the absence is the story. Schedule C is open
only to **registered** manufacturers. A manufacturer below RM500,000 is not
registered, so it:

- cannot use Schedule C to buy inputs free of tax;
- does not charge sales tax on its output; and
- therefore absorbs sales tax on its inputs with no recovery at all.

Being under the threshold is not always the cheaper position. A manufacturer
with heavy taxed inputs and thin margins can be better off registering
voluntarily to unlock Schedule C.

## Relief where there is no credit

Since there is no input tax credit, Act 806 offers narrower mechanisms:

- **s.40 drawback** — the Director General may allow drawback of the full sales
  tax paid on taxable goods subsequently exported. Section 40(2) excludes
  petroleum.
- **s.39 refund** of tax overpaid or erroneously paid, claimable within one
  year, which the Director General may reduce where a refund would unjustly
  enrich the claimant.
- **ss.36 and 37 bad debt** refund and repayment, within six years of the sale.
- **s.41A Sales Tax Deduction Facility** — the practical answer to tax on tax.

The deduction facility exists because a registered manufacturer that buys
inputs from a **non-registered** supplier pays embedded sales tax it cannot
otherwise recover. Under regulation 16B the deduction is a percentage of the
**total purchase value**, not of tax paid:

| Sales tax rate borne by the input | Deduction |
| --- | --- |
| 5% | 2% of purchase value |
| 10% | 4% of purchase value |

On an input costing RM1,000 that bore 5% tax, marked up 50% by the supplier to
RM1,575, the deduction is RM1,575 × 2% = **RM31.50**, offset in the SST-02
return. It is relief, not restitution — it deliberately under-compensates.

## Common mistakes

- **Filing a CJ5 or CJ5A.** Abolished with the 1972 Act. Use Schedule C.
- **Confusing Schedule C items 3 and 4 with item 5.** Items 3 and 4 are the
  trader or agent facility; item 5 is subcontract work returned.
- **Calling exempt goods zero-rated.** There is no 0% rate, and the difference
  determines whether you need Schedule B or Schedule C.
- **Testing the RM500,000 threshold on total turnover.** It applies to goods you
  manufacture.
- **Registering as an importer.** Importers pay at clearance and do not register.
- **Citing 1 July 2025 tariff codes as current.** The schedules were amended on
  1 November 2025 and rebased onto the Customs Duties Order 2025.
- **Looking for an input tax credit.** There is none. The nearest equivalent is
  the s.41A deduction at 2% or 4% of purchase value.

## What's next

Settle three questions in order: are your goods taxable or exempt, are you a
manufacturer above RM500,000, and do your inputs bear tax you could relieve
under Schedule B or Schedule C. Only the third is discretionary, and it is the
one that changes your cost base.

Once registered, sales tax and service tax are reported on the same SST-02
return and follow the same taxable period and penalty regime — so the filing
mechanics are worth reading once and applying to both.

## Sources

- Sales Tax (Rate of Sales Tax) Order 2025, P.U.(A) 170/2025 — https://mysst.customs.gov.my/wp-content/uploads/2025/07/1-PUA-170_2025.pdf (Attorney General's Chambers)
- Sales Tax (Rate of Sales Tax) (Amendment) Order 2025, P.U.(A) 199/2025 — https://mysst.customs.gov.my/wp-content/uploads/2025/07/2-PUA-199.2025.pdf (Attorney General's Chambers)
- Sales Tax (Goods Exempted from Sales Tax) (Amendment) Order 2025, P.U.(A) 200/2025 — https://mysst.customs.gov.my/wp-content/uploads/2025/07/4-PUA-200_2025.pdf (Attorney General's Chambers)
- Sales Tax (Persons Exempted from Payment of Tax) Order 2018 — https://mysst.customs.gov.my/wp-content/uploads/2025/03/Sales-Tax-Person-Exempted-From-Payment-Of-Tax-Order-2018.pdf (Attorney General's Chambers)
- FAQ — Sales Tax — https://mysst.customs.gov.my/faq-sales-tax/ (RMCD)
- Sales tax exemption facilities and application modules — https://mysst.customs.gov.my/about-exemption/ (RMCD)
- Guide on Sales Tax Deduction Facility (listed under Specific Guides) — https://mysst.customs.gov.my/specific-guides/ (RMCD)

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