PUTRAJAYA: The government expects to raise RM5bil from the revision of the sales tax and expansion of the service tax (collectively SST) to other services effective July.
Finance Minister II Datuk Seri Amir Hamzah Azizan, said the revision of the SST is driven by the need to improve the fiscal space of the federal government to improve the delivery of service to the public and lower the cost of living besides increasing the amount of cash assistance to the people.
“To ensure that the majority of the people are not affected by the SST revision, the Madani government is taking a targeted approach to ensure that basic goods and services are not taxed.
“In addition, various facilities are also provided to reduce the impact on micro, small and medium enterprises,” he told a media briefing here yesterday.
Hence, Putrajaya has maintained zero sales tax on essential goods like rice, chicken meat, and vegetables but introduced a 5% tax on goods such as king crab, salmon, truffle and essential oil as well as raise the sales tax to 10% for products such as racing bicycles, antique hand paintings and tungsten scrap residues from 5%.
It has broadened the tax base and imposed a 8% tax on services such as rental and leasing, financial and beauty services, and a 6% tax on construction, healthcare and education services.
The Chartered Tax Institute of Malaysia (CTIM) said the move to revise the SST was timely and a strategic use of indirect taxation to enhance government revenue without resorting to further direct taxes or reintroducing the goods and services tax at this juncture.
“As Malaysia’s service-based economy continues to grow, CTIM recognises the government’s effort to broaden the tax base by incorporating more sectors into the SST regime.
“This aligns with global trends and reflects a pragmatic approach to fiscal sustainability,” it noted in a statement.
CTIM added to ensure a smooth transition, it urged the government to establish dedicated support channels – such as hotlines, emails, or live chats – manned by knowledgeable personnel to provide timely responses and minimise compliance risks.
The collection of the SST from registered businesses will begin next month and for companies that now come under the tax space collection, it is expected to begin in September after such businesses have registered with the Customs department.
This extension of the SST is accompanied by selected exemptions to avoid double taxation as well as ensure that certain essential services for Malaysian citizens are not taxed, Amir Hamzah added.
Details are available on the Royal Malaysian Custom’s department’s website.
Putrajaya collected about RM45bil in SST in 2024.
According to the Finance Ministry’s official first quarter 2025 Economic Report, the federal government’s revenue for the quarter amounted to RM72.1bil, driven in part by a surge in SST receipts which totalled RM11.1bil.
The reimplementation of SST in September 2018 saw the government collect RM5.4bil for the period.
Annual SST collection in 2019 amounted to RM27.6bil, RM25.2bil in 2020, RM25.5bil in 2021, RM31.3bil in 2022 and RM35.4bil in 2023.
