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Sohaib Ikram
Sohaib Ikram serves as the Director of Emerhub in Malaysia.
If you’re doing business in Malaysia or planning to establish operations in the country, it’s crucial to familiarize yourself with the Sales and Service Tax (SST) system. This tax regime has a significant impact on various aspects of your business, from pricing strategies to compliance requirements.
In this article, we will take a look at the essentials of Sales and Service Tax (SST) in Malaysia including the rates, registration requirements, and penalties.
What is SST in Malaysia?
The Sales and Service Tax (SST) is a consumption tax on goods and services in Malaysia. It replaced the former Goods and Services Tax (GST) system, in September 2018 and was significantly expanded as of July 2025 to widen its scope and restructure tax rates.
The SST comprises two separate tax components:
1. Sales Tax
The Sales Tax is a single-stage tax imposed on imported and locally manufactured goods sold for the first time. Businesses are required to pay it either at the point of importation, when goods are declared for customs clearance, or at the point of first sale by the registered manufacturer.
Most goods now fall under the 5% or 10% sales tax band, depending on their classification under Malaysia’s Harmonized System (HS) code, which categorizes them as essential, intermediate, or discretionary. Here’s how they break down:
- 5% Sales Tax: For non-essential and processed goods. This includes processed building materials (e.g. bricks, tiles, metal piping), tyres and mid-tier electronics, imported seafood (e.g. lobster and abalone), and processed foods (e.g. jam and cheese).
- 10% Sales Tax: For luxury and discretionary goods, such as designer clothing, premium electronics, jewelry, cosmetics, cigars, alcoholic beverages, as well as all passenger and commercial vehicles.
- Specific Rates: Apply to selected goods like petroleum products (e.g. benzene, diesel).
| Note: HS codes are mapped directly to the categories listed in the Sales Tax (Rate of Tax) Order 2025. Products not explicitly listed under 0% or 5% default to the 10% rate. |
2. Service Tax
The Service Tax is a tax charged on specific taxable services provided in Malaysia by a registered person. Today, it applies to a broad range of services such as accommodation, food and beverage, professional services, and several other prescribed services.
Effective July 1, 2025, the Service Tax rate applies at either 6% or 8%, with 8% applying to most services, including new categories such as:
- Financial brokerage and underwriting services
- Leasing and rental (excluding car rentals and residential property)
- Digital platforms and streaming services
- Beauty, wellness, and personal care
- Karaoke and entertainment venues
The 6% rate continues to apply to essential services, including:
- Logistics, warehousing, courier, transport, and supply chain services
- Food and drink services
- Telecommunication services
- Parking services
- Construction services
- Private healthcare and education (under specific conditions, mainly for non-citizens)
Goods Exempt from Sales Tax in Malaysia
Under the Sales Tax (Goods Exempted from Tax) Order 2025, certain goods remain exempt from sales tax in Malaysia. This means that businesses dealing with these products do not need to charge sales tax on them.
These exemptions typically cover essentials, raw materials for manufacturing, and public-interest goods. Here are examples of goods that remain exempt:
- Exported Goods: All goods manufactured for export.
- Essential Food Items: Live animals, fish, seafood, meat, milk, eggs, vegetables, fruits, and bread.
- Publications: Books, magazines, newspapers, journals, periodicals.
- Bicycles: Including parts and accessories.
- Mineral Substances and Chemicals: As listed under RMCD’s exemption schedule
- Pharmaceutical Products: Medicines, medical creams, cough syrups, bandages, multivitamins, and mineral medicaments.
- Agricultural Inputs: Fertilizers and insecticides.
- Goldsmith Articles: Gold, platinum jewelry, silver tableware.
- Tax-Free Raw Materials: Registered manufacturers can import or acquire raw materials tax-free for manufacturing taxable goods.
Registration for Sales and Service Tax in Malaysia
Registration for SST in Malaysia is mandatory for businesses that meet certain criteria. Here are the key registration requirements:
Requirements to Register for Sales Tax in Malaysia
Manufacturers or importers with a sales value exceeding RM 500,000 in the past 12 months must register for sales tax.
Under Section 14 of the Sales Tax Act 2018, It is also possible to voluntarily register for the sales tax voluntarily if your annual sales value is below RM 500,000.
Requirements to Register for Service Tax in Malaysia
In Malaysia, most service providers need to register for service tax if their annual taxable turnover exceeds RM 500,000. However, there are specific requirements for certain service providers:
- Mandatory Registration Regardless of Turnover: Credit card/charge card service providers and forwarding agents must register for service tax regardless of their annual sales value.
- Higher Threshold for Food and Beverage Services: Operators of restaurants, bars, snack bars, canteens, coffee houses, and any place providing food and drinks must register if their annual taxable turnover exceeds RM 1.5 million. There are no exemptions for F&B service provides under the current framework.
To register for SST in Malaysia, businesses need to submit the relevant forms and supporting documents to the Royal Malaysian Customs Department (RMCD). To make the process easier, Emerhub will gather all the necessary documents and register for SST on your behalf.
Once registered, we will provide you with an SST number that you will include on invoices and tax returns.
Penalties for Sales and Service Tax (SST)
Failure to comply with SST regulations in Malaysia can result in severe penalties and legal consequences.
For instance, not filing your SST returns or non-payment of the collected SST amount can lead to a fine of up to RM50,000, imprisonment of up to three years, or both.
Similarly, there are penalties for late payment which vary depending on the number of days you delay the payments.
Here is a table outlining the late SST payment penalties in Malaysia:
| Delay Period | Penalty |
| Up to 30 days after the due date | 10% of the unpaid amount |
| 31-60 days after the due date | 25% of unpaid amount (10% + 15%) |
| 61-90 days after the due date | 40% of unpaid amount (10% + 15% + 15%) |
Simply Your SST Registration and Filing in Malaysia with Emerhub
Ensuring full compliance with Malaysia’s Sales and Service Tax (SST) can be complex, especially for businesses new to the country. Emerhub simplifies this process by handling all aspects of SST registration and filing for you.
Fill out the form below and we will put you in touch with one of our experts in Malaysia.
Frequently Asked Questions About SST Registration in Malaysia
Malaysia applies a tiered sales tax rates on goods and a flat rate on services:
- Sales Tax:
- 0%– Essential goods (e.g. rice, vegetables, books, medicine)
- 5%– Mid-range and processed goods (e.g. building materials, tyres, basic electronics)
- 10% – Luxury and discretionary goods (e.g. designer apparel, premium electronics, vehicles, alcohol)
- Specific rates – Apply to petroleum products
- Service Tax:
- 6% Rate (Essential/Priority Services): Applied to essential consumer and key economic services like food and beverage, telecommunications, parking, and logistics. It is maintained to minimise the cost impact on daily life and crucial business operations.
- 8% Rate (Standard Services): This is the general increased Service Tax rate applied to most other taxable services, covering financial brokerage, commercial rentals, digital platforms, beauty services, and entertainment. This standard rate is part of a wider effort to broaden the tax base and increase government revenue.
Note that if a product is not listed under the 0% or 5% bands in the Sales Tax (Rate of Tax) Order 2025, it is automatically taxed at 10%.
The July 2025 update to Malaysia’s SST framework has significantly expanded the list of taxable goods and services. Several items that were previously exempt or excluded now fall within the scope of either the 5% or 10% tax bands, depending on their classification.
Emerhub can assist in reviewing your goods or services against the updated Harmonized System (HS) code list to confirm their correct tax treatment.
Newly taxable services now include:
- Leasing and rental services (excluding motor vehicles)
- Financial brokerage and underwriting
- Digital platforms, including streaming and e-commerce
- Beauty, wellness, and personal care services (e.g. salons, spas)
- Karaoke and entertainment venues
Newly taxed goods include:
- Processed food items such as cheese and jam
- Imported seafood like lobster and abalone
- Other previously exempt goods now reclassified under the 5% band
You’re required to register once your business meets the relevant threshold for taxable goods or services under the expanded SST framework, which took effect on 1 July 2025.
If you’re unsure whether you qualify, or prefer not to navigate the complex process yourself, Emerhub can handle the entire registration on your behalf. This includes:
- Securing your SST registration approval and number
- Verifying if your goods or services fall within the updated taxable scope
- Confirming your HS code classifications or service eligibility
- Preparing and submitting all required documentation to the Royal Malaysian Customs Department (RMCD)
Yes, there are. To help businesses adjust to the new tax structure, the government has introduced a grace period from 1 July to 31 December 2025. During this time, penalties will not be imposed on businesses that are actively working toward compliance– whether that means registering, updating invoices, or reviewing taxable product lines.
However, enforcement begins fully on 1 January 2026. If your business is eligible but unregistered after that date, you may face fines or backdated liabilities. Emerhub can help ensure you’re registered and compliant well before that deadline.
The SST framework sets different thresholds based on what your business supplies:
- Sales Tax: You must register if you manufacture or import taxable goods exceeding RM500,000 in annual sales. Voluntary registration is also allowed if you’re below this threshold but want to stay ahead.
- Service Tax: Registration is required if your taxable service turnover exceeds RM500,000– or RM1.5 million if you run a food and beverage business. Some industries, like credit card providers and forwarding agents, must register regardless of turnover.
There are no exemptions for businesses once they cross these thresholds, even if they’re foreign-owned or newly operating. Emerhub can assess your eligibility and register your business accordingly.
