KUALA LUMPUR – The Malaysian government has assured that essential goods and basic services will remain exempt from the expansion of the sales and service tax (SST). The sales tax rate on essential goods will continue to be 0%, covering both sales and service tax components.
In a written parliamentary response, the Finance Ministry (MoF) also said that the finalised expansion of the SST scope and the reviewed tax rates are set to be gazetted through subsidiary legislation in the first quarter (Q1) of 2025.
This follows ongoing engagement sessions with relevant stakeholders to allow sufficient preparation before the changes take effect.
The government, in collaboration with the Royal Malaysian Customs Department, is actively engaging with various ministries and industry players to determine the final scope and applicable tax rates. These consultations include not only industries directly affected by sales tax but also major service-related sectors, it added.
“The government is carefully evaluating the feedback received from these sessions. Based on this, we propose maintaining the zero per cent sales tax rate on essential goods. Meanwhile, sales tax rates of 5% and 10% will be extended to non-essential, processed, high-value, and imported goods,” the ministry added.
For the service tax, the revised structure includes proposed rates of 6% and 8%, which will apply to selected service sectors. Engagement sessions have also addressed the complexities of emerging taxation issues and their potential impact on these industries.
“The government will ensure that these tax rate adjustments do not negatively impact vulnerable groups and that inflation remains controlled,” the MoF emphasised in its answer to Datuk Seri Wee Ka Siong (Ayer Hitam-BN) regarding the details of the progressive expansion of the SST’s scope that will be implemented effective May 1, 2025, and whether there will be an increase in tax rates in the expanded scope.
The expansion of the SST scope and rate adjustments are part of a broader strategy outlined in Budget 2025 to enhance Malaysia’s tax system while ensuring that the additional revenue is channelled back into public services and assistance programmes.
The government also stressed that it would strike a balance between increasing national revenue and protecting the interests of businesses, including micro, small, and medium enterprises (MSMEs).
“The government remains cautious in improving the national tax system and increasing revenue while ensuring that it benefits the people through public services and aid. While there is a need to enhance revenue, we will continue to balance this objective with the need to protect the people, industries, and businesses, including MSMEs,” the MoF said. – February 7, 2025