Sales Tax in Malaysia — Rates, Mechanics and Exemptions

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.