The SST B2B Exemption and What Your Invoice Must Show

The B2B exemption fails on the same condition almost every time: the service acquired must be the same taxable service the acquirer goes on to provide. Not a related service, not a service in the same group — the same item.

A law firm buying legal services from another firm is exempt. The same firm buying advertising is not.

Where the exemption comes from

B2B relief is not in the Service Tax Act. It sits in the Service Tax (Persons Exempted from Payment of Tax) Order 2018, P.U.(A) 380/2018, made under s.34(1), which exempts persons in column (2) from payment of tax on the services in column (3), subject to conditions in column (4). It is an exemption from payment, not from scope — which is why exempted supplies still count toward your registration threshold.

Which groups have a B2B exemption?

Item	Group	Conditions in outline
1	Group G professionals, excluding items 10 and 11	Both parties registered Group G persons; the exempted service is provided under the same item as the service the acquirer provides; excludes paragraphs (j) and (k)
2	Group I item 8 advertising	Both parties registered; the service is provided by a registered Group I item 8 person
6	Group H finance, for Labuan	Acquired from a registered Group H person or a person outside Malaysia, and used to provide a service regulated under the Labuan Financial Services and Securities Act 2010 or its Islamic equivalent
8	Group K rental or leasing	Both parties registered Group K persons; same taxable service; and provided for the purposes of sublet or sublease and not for personal consumption
9	Group L construction works	Both parties registered Group L persons; same taxable service; and not for personal consumption by the acquirer

Items 6 and 8 to 10 were inserted by P.U.(A) 174/2025 with effect from 1 July 2025.

Note the asymmetry. Rental B2B requires an onward sublet or sublease — a company renting equipment to use itself cannot claim it. Construction B2B has no sublet requirement; it only excludes personal consumption, which is what makes main-contractor to sub-contractor chains work.

The same order carries two exemptions that are not B2B at all but are often confused with it: item 7 exempts a citizen receiving private healthcare, traditional medicine or allied health services under Group I items 14 to 16, and item 10 exempts a citizen holding a valid Kad OKU under the Persons with Disabilities Act 2008 from tax on Group M item 1 education.

Where there is no B2B exemption

Private healthcare. Service Tax Policy No. 6/2025 states plainly that no B2B exemption is granted for healthcare services obtained from third parties within the same group of services.

Design and build construction consultancy is handled by policy rather than the order — Service Tax Policy No. 3/2025 (Amendment No. 3) grants B2B for consultancy under a design and build contract where the services sit in a single contract covering the whole scope supplied by the main contractor to the developer or landowner.

What the invoice must show

There is no separate prescribed B2B invoice format. The requirements are the ordinary ones in regulation 10(1) of the Service Tax Regulations 2018: the invoice serial number and date; the name, address and identification number of the registered person; a description sufficient to identify the services; any discount; the amount excluding service tax, the rate and the total tax shown separately; the total including tax; and any foreign-currency amount also expressed in ringgit. Regulation 10(2) lets the Director General waive particulars on written request.

In practice the exemption is evidenced by the conditions being met rather than by wording on the invoice. Keep the counterparty’s registration status, the contract identifying the service, and the onward invoice — records must be kept under s.24 of the Act.

Common mistakes

• Claiming across items. The service acquired must be the same taxable service you provide.
• Claiming where the customer is unregistered. Both parties must be registered persons.
• Using rental B2B for your own use. Group K requires onward sublet or sublease.
• Assuming healthcare has B2B relief. It does not.
• Excluding B2B supplies from the threshold. Exemption from payment does not remove the supply from the threshold test.

What’s next

Map each inbound taxable service against the item you supply onward, and confirm the counterparty’s registration before accepting an invoice without tax. Where tax was charged and B2B should have applied, correct it by credit note under regulation 11, adjusted in the SST-02 return for the period the note is issued.