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Share: A little bit about SST (01/07/2025)

As part of Malaysia’s fiscal reform under Budget 2025, significant changes have been made to the Sales and Service Tax (SST) regime. The adjustments, effective from 1 July 2025, aim to increase government revenue while maintaining fairness by excluding essential goods and focusing taxation on premium items and services.

This article provides a clear explanation of the SST system, its latest updates, categories affected, compliance requirements, and implications for businesses and consumers alike.

✅ What is SST?

SST refers to a single-stage tax system that replaced the GST (Goods and Services Tax) in 2018. It consists of:

  • Sales Tax – charged on manufacturers and importers at the production or import level.
  • Service Tax – imposed on certain prescribed taxable services provided by businesses.

SST is collected only once in the supply chain, unlike GST, which is multi-staged and creditable.

📅 Key Effective Dates

  • Start Date: 1 July 2025
  • Transition Period: July 1 – December 31, 2025 (no penalties for late compliance during this period)

🛒 Sales Tax 2025: What's New?

The sales tax continues to apply to goods manufactured locally or imported, but the scope has been expanded to include more non-essential and luxury items. Tax rates remain at 5% or 10%, depending on the item category.

Key Changes:
Exemptions remain for basic food items, books, medications, and educational materials.

New taxable goods include:

  • Salmon, avocadoes, cherries, and imported fruits
  • Essential oils, skincare serums, spa devices
  • Luxury goods such as high-end watches, racing bicycles, collectible art

 

⚙️ Service Tax 2025: Major Expansion

The service tax has undergone the most significant expansion to include more service categories. New rates apply, either 6% or 8%, depending on the nature of the service.

Newly Taxable Service Categories:

❌ Beauty services (e.g. haircut, spa) are excluded from the current expansion.

📝 Invoicing & Transition Rules

To avoid confusion during the switch, the government has set clear invoicing rules:

  • If invoice issued before 1 July 2025 but delivery happens later, old tax rules apply.
  • Invoices dated 1 July 2025 and later must apply the new SST rates.
  • Grace period until 31 December 2025 allows businesses to comply without penalty.

🧾 SST Registration Requirements

Businesses must register for SST if their taxable turnover exceeds specific thresholds.

 

📤 Filing SST Returns

  • Returns must be filed every 2 months (bi-monthly filing).
  • Businesses must file even if no tax is due.
  • Payment is due within 30 days of the taxable period’s end.
  • Penalties for non-compliance may include:
    • Late filing fines
    • 10%–15% interest for late payment
    • Legal prosecution (for serious violations)

💡 Why the SST Changes Matter

The SST changes are designed to:

  • Boost government revenue by taxing luxury goods and premium services.
  • Avoid burdening the general population, as essential goods remain exempt.
  • Support fairer taxation in line with rising incomes and consumption trends.

Government projections estimate an additional RM 3 billion/year in tax collection from this expansion.

🧭 How Businesses Should Prepare

  • Check Your Products/Services – Determine if you now fall under SST.
  • Update Accounting Systems – Adjust tax codes, software, and pricing.
  • Inform Customers – Especially if prices need to change due to new tax.
  • Register for SST – If turnover exceeds threshold.
  • Monitor Invoicing Dates – Apply the right tax based on transaction timing. 

Guidelines for the transition of Sales Tax rate changes (01/07/2025) source: mysst
Expansion SST Scope (01/07/2025) source: MOF

mysst official website
MOF official website

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