We explain how Malaysia’s single‑stage consumption levy works and how it affects your pricing and compliance. SST places economic burden on customers while leaving collection and remittance with registered businesses.
The rule of thumb is an annual turnover threshold of RM500,000 for most taxable goods and services. Sales and service streams are separate, with specific sector thresholds for some providers.
We outline practical steps: check rolling 12‑month turnover, use the MySST portal, and expect an approval letter with a registration number and effective date. New 2025 categories have a penalty‑free grace period until December 31, 2025.
Our guide also covers rates, invoice requirements, recordkeeping, and export or exemption impacts so you can update contracts and internal controls with confidence.
Key Takeaways
- Most firms cross the RM500,000 threshold based on a rolling 12‑month turnover test.
- Sales and service streams require separate registration and compliance steps.
- MySST issues an approval letter, registration number, and effective date for returns.
- The 2025 grace period lets affected firms comply without penalties until year‑end.
- Maintain clear invoices and records to avoid audit issues and pricing errors.
Understanding Malaysia’s Sales and Service Tax (SST) at Present
We outline the present single‑stage framework so you can see practical effects on pricing and compliance. SST is split into two distinct charges: one on taxable goods at manufacture or import, and one on prescribed services at the point of supply.
Single-stage operation
Sales tax is imposed once when goods are produced or imported. Service tax applies once when a listed service is rendered. This model removes input tax credits and lowers cascading risk compared with multi‑stage systems.
Who bears the cost, and who collects
Consumers carry the economic burden while businesses collect and remit the amounts to the RMCD. Clear invoices must show sales tax or service tax separately to support audits and customer transparency.
- Manufacturers/importers — collect sales tax on taxable goods.
- Service providers — charge service tax on prescribed services.
- Retailers/distributors — typically sell taxed goods without adding sales tax again.
“SST returned on 1 September 2018, replacing GST and refocusing collection at single points in the chain.”
| Type | Typical Collector | Example |
|---|---|---|
| Sales tax | Manufacturer / Importer | Processed food items |
| Service tax | Service provider | Taxable professional services |
| Exempt | Retailer | Final sale with no extra levy |
From GST to SST: What Changed and Why It Matters for Businesses
Replacing GST with two single‑stage levies reshaped input cost treatment and filing obligations for businesses. The goods services tax at 6% used a multi‑stage, input‑credit mechanism. That model let firms reclaim tax paid on inputs across the chain.
Key structural differences
SST separates sales tax and service tax.
- GST: multi‑stage, 6% with input credits.
- SST: two single‑stage levies collected at specific points.
- Reintroduced on 1 September 2018 after the repeal.
Implications for pricing, credits, and compliance
Without input credits, input costs stay within your margin. That often raises end prices for long supply chains.
Compliance focus shifted. The government expects accurate registration, correct tax application, timely filing, and record retention. Firms face narrower scope but precise rules for manufacturers and service providers.
“The shift requires updated contracts, pricing models, and system settings to reflect single‑stage taxation.”
| Aspect | GST (pre‑2018) | SST (post‑2018) |
|---|---|---|
| Model | Multi‑stage with credits | Two single‑stage levies |
| Typical rates | 6% across stages | Sales: 5%/10% · Service: 6%/8% |
| Cost flow | Input tax recovery | No input credits; costs retained |
| Compliance | Complex returns and credits | Focused returns, registration tests |
We recommend a readiness checklist: review contracts, update pricing logic, adjust ERP tax codes, and train finance staff. Monitor legislative updates because debates about tax frameworks persist even as current rules remain in force.
SST Rates in Malaysia: Sales Tax and Service Tax Today
Here we map current percentage bands for taxable goods and listed services, with clear examples for billing and product mapping.
Sales tax bands and examples
Sales tax applies at either 5% or 10%. Construction inputs and selected foodstuffs often fall at 5%. Most other taxable goods, such as petroleum oils, timepieces, shampoos, and detergents, carry the 10% rate.
Update your SKU master when RMCD issues changes. July 2025 added some imported fruits and other items into exemption lists or specified a 5%/10% treatment.
Service tax bands and covered services
Service tax moved largely to 8% in March 2024. Food & beverage, telecommunication, parking, and logistics remain at 6%. Train billing teams to apply the correct percentage by service category.
Zero-rated and exempt items
Essential goods—rice, chicken, vegetables, eggs, local fish—books and medicine are either exempt or zero‑rated. That distinction affects input handling and final pricing.
“Maintain a documented mapping of goods and services to rates and review it after each RMCD schedule update.”
- Apply the correct rate line by line on invoices.
- Run monthly sample invoice QA to prevent misapplication and penalties.
- Communicate price changes to customers with clear justifications.
| Category | Typical Rate | Example |
|---|---|---|
| Selected materials | 5% | Certain construction inputs |
| General taxable goods | 10% | Shampoos, detergents |
| Most services | 8%/6% | Professional services / F&B, telecommunication |
Who Need to Register SST Malaysia: Thresholds and Triggers
We outline the rolling turnover tests and projection rules that create a legal obligation to enrol under SST. Read each point and check your accounts. Early action avoids penalties and cashflow surprises.
General RM500,000 annual turnover rule
Threshold: Most firms hit the RM500,000 test when total taxable sales or services over the past 12 months exceed that amount. Compute taxable value after removing exempt lines, credit notes, and cancellations.
When projections versus actuals trigger registration
Reasonable projections that show your taxable turnover will exceed the threshold in the next 12 months can trigger sst registration before an actual breach. Document forecasts and assumptions.
- Sales and service registration are separate; qualifying for one does not auto-enrol you for the other.
- Segment revenue streams for mixed operations to identify which lines count toward each threshold.
- Monitor monthly dashboards and retain supporting documents for any early enrolment decision.
| Trigger | Action required | Example |
|---|---|---|
| Past 12‑month turnover > RM500,000 | Complete sst registration | Manufacturer crossing RM500k |
| Reasonable projection > RM500,000 | Enrol early with evidence | New contracts raise expected sales |
| Sector-specific higher limits | Refer sector rules (Section 7) | Private healthcare, restaurants |
Document your calculations and keep records that support forecasts. This practice meets compliance requirements and simplifies any RMCD queries.
Sales Tax Registration: Manufacturers and Importers of Taxable Goods
If your factory or import operation handles taxable goods, understanding when liabilities arise is essential. We define practical boundaries so you can align production, customs, and accounting processes.
What counts as manufacture and taxable goods
Manufacture means a substantial transformation that creates a new product. Contract manufacturing and in‑house processing can both trigger sales tax when the finished item meets the taxable schedule.
Crossing RM500,000 in the past 12 months
Use a rolling 12‑month test on taxable sales to watch the threshold. Once your taxable sales exceed the set limit, complete registration and update your billing and returns schedule.
Special cases: exports, imports and exemptions
Exports are generally not subject to domestic sales tax; many essential items carry exemptions or zero‑rating. For imports, tariff codes and customs classification determine the rate and border liability.
- Recognize tax on an accrual basis: when goods are sold, disposed, or first used.
- Map bills of materials and tariff codes to each SKU for correct treatment.
- Keep invoices in English or Bahasa Melayu and retain records for seven years.
| Action | Why it matters | Example |
|---|---|---|
| BOM & tariff mapping | Correct rate allocation | Raw material → finished SKU |
| Monthly reconciliation | Accurate returns and timing | Production vs taxable sales |
| Document retention | Audit readiness | Import declarations, certificates |
“Treat classification and timing as the control points for clean compliance.”
Service Tax Registration: Prescribed Taxable Services and Sector Thresholds
Service tax rules set clear revenue triggers for providers of listed services and change how you price recurring contracts.
Standard threshold: Taxable services cross a RM500,000 rolling 12‑month test for ordinary coverage. Map your invoices and contracts to identify whether total taxable sales reach this threshold.
Higher and sector limits
Certain sectors get elevated limits. Rental and some financial lines use an RM1,000,000 cutoff. Restaurant operators face an RM1,500,000 threshold. Private education uses an annual per‑student benchmark (example: RM60,000) to decide qualification.
- Telecommunication remains taxed at 6%—price bundled plans carefully.
- Private healthcare and construction join the list from July 2025; plan billing and ERP changes now.
- Document services provided, recurring billing, and contracts for multi‑site tracking.
| Sector | Threshold | Note |
|---|---|---|
| General services | RM500,000 | Standard taxable services |
| Rental / financial | RM1,000,000 | Selective treatment |
| Restaurants | RM1,500,000 | Higher threshold |
“Segment revenue lines in your ERP and document mixed supplies clearly on invoices.”
Where projections show a breach, you must register early. Segmenting revenue by service line helps businesses monitor thresholds and keeps compliance audit‑ready.
2025 Updates: Expanded Goods and Services, New Thresholds, and Grace Period
July 2025 brings a significant expansion of taxable items and listed services that will change billing and supply‑chain treatment for many firms. The government added leasing, rental, private healthcare for foreigners, and private education for international students to the covered service list.
What changes on 1 July 2025
More goods move into the 5%/10% bands, so update SKU mapping for proper sales tax application. Select imported fruits — apples, oranges, mandarins, and dates — are now exempt, affecting importers and retailers.
Rates, brackets and thresholds
Review rates for each category. Some services shift between the 6% and 8% bands. Special thresholds rise for certain sectors (RM1,000,000 and RM1,500,000), so recalc your registration triggers.
Grace period and compliance steps
“A penalty‑free grace period runs until December 31, 2025 for businesses showing genuine efforts to comply.”
Document your changes, revise POS/ERP tax codes, retrain billing teams, and appoint a compliance owner. Keep transition invoices clear for services spanning June–July 2025.
- Create a cutover checklist and test system settings before July 1.
- Issue a board‑approved SST change memo as evidence of your program.
- Assign one contact point for government queries and ongoing clarifications.
What Is Exempt or Zero-Rated: Essential Goods and Protected Sectors
This section defines common exemptions and zero‑rating so you can apply correct billing treatment. We list typical essentials and show how export and sector rules affect invoicing.
Key essential items
Essential goods commonly exempt include rice, chicken, eggs, vegetables, local fish, medicines, and books. Flag these SKUs in your system so sales lines display no levy.
Exports and sector exclusions
Goods manufactured for export are normally zero‑rated or exempt from domestic sales tax. This treatment supports competitiveness and avoids double charging on international shipments.
- Some imported fruits moved to exemption lists in July 2025; retain customs docs and tariff codes.
- Private healthcare and certain private education services have evolving treatment; track announcements for service tax status.
- For mixed baskets, apply line‑by‑line charging and show exempt items separately on invoices.
Keep documentary evidence: product codes, supplier invoices, export declarations, and RMCD guidance. Regular reviews of exemption schedules help your teams explain price differences and protect margins.
How to Register for SST: Step-by-Step via MySST
Begin online at www.mysst.customs.gov.my. Create an account, then gather company details and supporting files before starting the web form. This simple process reduces queries and speeds approval.
Using the MySST portal: information you must gather
Prepare statutory items: business registration details, director names, nature of activities, and turnover evidence. Select whether you apply for sales or service streams; these are separate registrations.
- Upload certified documents with clear file names and prescribed formats.
- Double-check turnover figures and category selection to avoid delays.
- Keep an internal checklist with owners and target dates.
Approval letter, registration number, and effective date
The portal issues an approval letter, a registration number, and an effective date. That date governs when you must start charging tax and meeting reporting obligations.
Deadlines tied to threshold breaches
Submit the application not later than the last day of the following month after you breach the threshold. Missing this deadline exposes your business to penalties and interest.
“Accurate uploads and timely submission cut follow-up queries from the government.”
Compliance After Registration: Accounting Basis, Invoicing, and Records
After registration, your accounting choices determine when tax is reported and paid. Sales tax follows an accrual rule: tax arises when goods are sold, disposed, or first used. That timing affects revenue recognition and inventory controls.
Service tax runs on a payment basis. Tax is due when you receive payment, or automatically on the day after 12 months from invoice date if unpaid. Set automated alerts for that “day after 12 months” rule to avoid under‑declaration.
Invoice rules and languages
Invoices may be hardcopy or electronic and must be in Bahasa Melayu or English. Include prescribed details: supplier name, registration number, invoice date, tax rates, and separate tax lines. Clear invoices speed audits and reduce disputes.
Taxable period and record retention
The standard taxable period is two calendar months. You may apply for a variation with the Director General if operational needs justify it. Maintain month‑end reconciliations that match receipts and bank statements to reported liabilities.
| Topic | Rule | Action |
|---|---|---|
| Sales tax timing | Accrual basis | Record at sale/disposal/use |
| Service tax timing | Payment basis / 12‑month fallback | Track receipts and 12‑month triggers |
| Taxable period | Two calendar months | File returns on schedule; seek variation if needed |
| Record keeping | Seven years | Retain digital/hardcopy; obtain DG approval for offshore storage |
Bad debt relief for service tax is available between 6 months and 6 years, subject to approval. If a debt is later recovered, the tax component must be repaid. Keep supporting documents for any relief claim.
Controls we recommend: month‑end checklists, clear credit/debit note procedures, KPI dashboards for on‑time filings and exception rates, and periodic mock audits. These steps protect cash flow and sustain compliance discipline.
“Consistent reconciliations and documented controls reduce compliance risk and simplify audits.”
Non-Compliance Risks: Penalties, Late Payment Tiers, and Enforcement
Non-compliance carries both immediate fines and longer-term enforcement risks that can harm company value and reputation. Regulators may levy statutory penalties for non-submission and non-payment, including fines up to RM50,000 and imprisonment for up to three years, or both. Deliberate evasion invites higher sanctions and public enforcement action.
Non-submission and non-payment penalties
File and pay accurately. Missing returns or unpaid liabilities triggers criminal and civil routes. The RMCD expects clear records and evidence of timely attempts at settlement or correction.
Late payment tiers
Late charges rise in steps: 10% for days 1–30, an extra 15% for days 31–60, and another 15% for days 61–90, capped at 40% of the unpaid amount. Interest and administrative fees add further cost.
Foreign company rules and enforcement
Foreign firms must register only when they maintain a local branch or subsidiary. Purely offshore suppliers without physical presence usually fall outside local registration rules.
- Enforcement triggers: inconsistent returns, large adjustments, and customs mismatches.
- Defensive measures: payment calendars, approval workflows, and cash-flow reserves for tax liabilities.
- Remediation playbook: rapid self-review, voluntary disclosure, corrective filings, and board-level oversight with quarterly audits.
“A penalty-free grace period runs until December 31, 2025 for newly covered categories making genuine efforts to comply.”
| Risk | Impact | Action |
|---|---|---|
| Late filing | Fines / prosecution risk | Automate returns and alerts |
| Late payment | Surcharges up to 40% | Maintain reserve for liabilities |
| Evasion | Higher penalties & reputational harm | Voluntary disclosure and remediation |
Conclusion
Conclusion
Our final note outlines clear steps you can take now. SST is a single‑stage sales service tax covering sales tax on taxable goods at manufacture/import and service tax on prescribed services at supply.
Watch the RM500,000 rolling threshold and higher sector limits from July 2025. Update SKU and service maps, apply current rates, and flag exemptions for essential goods.
Use MySST for registration and keep approval letters, registration numbers, and effective dates on file. After enrolment, follow invoicing rules, timing differences between sales tax and service tax, and seven‑year record retention.
We recommend a governance framework: rate mapping, threshold monitoring, filing calendars, and audit‑ready documentation. Contact us to review mappings, confirm registration status, and streamline compliance.
FAQ
Do we need to register for Malaysia’s SST?
You must register when taxable supplies exceed the prescribed threshold or when a prescribed activity applies. For most businesses the RM500,000 annual turnover threshold triggers registration. Certain sectors, imports, or prescribed services can require registration earlier. If you operate as a manufacturer of taxable goods or provide prescribed taxable services, registration becomes mandatory once you meet the relevant tests.
How does Malaysia’s single-stage sales and service tax system operate?
SST is a single-stage regime where sales tax applies at manufacture or import, and service tax applies at the point of taxable service provision. Businesses collect tax from customers and remit it to the Royal Malaysian Customs Department. There is no input tax credit mechanism like GST; sellers add the applicable rate to their price and account for the tax collected.
Who ultimately bears the SST cost, and who collects and remits it?
Final consumers typically bear SST through higher prices. Businesses act as collectors: manufacturers or importers collect sales tax, and service providers charge service tax on invoices. Those registered must remit collected amounts and comply with returns and record-keeping obligations.
What changed when Malaysia moved from GST back to SST, and why does it matter?
The shift removed the multi-stage input credit mechanism and returned to single-stage taxation. Businesses can no longer claim credits for tax paid on purchases, which affects pricing, margin calculations, and working capital. Compliance procedures, invoice formats, and tax accounting also differ significantly from GST.
What are the key structural differences between GST and SST?
GST was a multi-stage, value-added tax with input tax credits at each stage. SST is single-stage, levied either at manufacture/import (sales tax) or on specific services (service tax) without input credits. GST covered broader supplies; SST covers listed taxable goods and prescribed services only.
How do these differences affect pricing, credits, and compliance?
Under SST businesses cannot recover tax on inputs, so costs may be higher and pricing must reflect that. Compliance focuses on accurate classification of taxable goods and services, timely returns, and correct invoicing. Businesses should review margins, vendor contracts, and accounting systems for the change.
What are current sales tax rates and examples of taxable goods?
Sales tax commonly applies at 5% or 10% depending on the tariff classification. Examples of taxable goods include certain automotive parts, selected manufactured products, and specific consumer items as listed in schedules. Exact classification dictates the applicable rate.
What are current service tax rates and which services are covered?
Service tax is generally 6% for most prescribed services, with certain categories subject to different rates such as 8% for specified cases. Taxable services include telecommunication, accommodation, professional services where prescribed, and other listed sectors under the service tax schedule.
Which goods and services are zero-rated or exempt?
Some essential goods and services receive exemption or zero-rating. Typical examples are basic food items like rice and local fish, medicines, books, and certain healthcare and education services. Exports are generally zero-rated or treated as not subject to domestic SST.
What is the general threshold for SST registration?
The general threshold for both sales and service tax is RM500,000 in taxable turnover in a 12‑month period. Once taxable receipts exceed that amount, registration becomes mandatory within the statutory timeframe.
When do projections versus actual turnover trigger registration?
Registration can be triggered by actual turnover crossing the threshold or by reasonable projections showing that the threshold will be exceeded. If expected receipts indicate a breach within 12 months, you should apply sooner to avoid penalties.
Who must register for sales tax as manufacturers or importers?
Entities that manufacture taxable goods in Malaysia or import taxable goods above the threshold must register for sales tax. Manufacture includes processes that transform raw materials into finished products. Importers of taxable goods are also liable to register and account for sales tax at importation where applicable.
What counts as “manufacture” and which goods are taxable?
Manufacture involves processing, assembling, or producing goods for sale. Taxable goods are those listed in the sales tax schedules; classification depends on tariff headings and product descriptions. You must check the Customs schedules to determine if your products are taxable.
Does crossing RM500,000 in the past 12 months require registration?
Yes. If your taxable turnover in the past 12 months exceeds RM500,000, you must register within the timeframe set by Customs. Keep accurate books so you can demonstrate turnover and meet filing deadlines.
Are there special cases such as goods for export and exemptions?
Exports are often exempt or zero-rated under SST rules. Certain goods for export may not attract domestic sales tax. Other exemptions apply for specific industries or goods defined in the legislation. Review the Customs rulings for sector-specific relief.
What are the prescribed taxable services and sector thresholds for service tax?
Prescribed services include accommodations, food and beverage outlets, telecommunication, professional services where listed, and others. The standard threshold is RM500,000, but specific sectors may have higher thresholds, such as RM1,000,000 or RM1,500,000 for designated activities.
Which sectors have higher or special thresholds like RM1,000,000 or RM1,500,000?
Certain sectors with distinct regulatory or economic characteristics have higher thresholds. Examples include large-scale service sectors and specific commercial activities noted in Customs guidance. Check the sector-specific rules to confirm your applicable threshold.
Is there a private education threshold per student per year?
Private education may be subject to sectoral thresholds or exemptions depending on the type of service and whether the student or course falls within prescribed categories. Specific per-student thresholds can apply; consult the detailed service tax rules for education providers.
What about restaurant operators and sector-specific nuances?
Restaurants and F&B outlets are often prescribed services. Thresholds, point-of-sale requirements, and invoicing rules can vary. Operators should ensure proper collection, display of tax amounts, and compliance with service tax invoicing standards.
What are the 2025 updates affecting goods, services, thresholds, and grace periods?
From July 2025 several additions will expand taxable services and goods, including certain leasing, rental activities, private healthcare for foreigners, and education for non-residents. New goods classifications and exemptions for some imported fruits were introduced. A penalty-free grace period runs until December 31, 2025, for affected taxpayers to register and adjust systems.
Which goods and services were added from July 2025?
Additions include specific leasing and rental services, expanded healthcare categories, and education services supplied to foreigners. The exact list appears in the updated Customs schedules and should be reviewed to determine applicability.
Are there new exempt imported fruits or other expanded exemptions?
The 2025 changes expanded some exempt imported agricultural goods, including selected fruits, to protect local supply chains. Check the Customs list for precise tariff codes and eligibility conditions.
What is the penalty-free grace period and who benefits?
The grace period lasting until December 31, 2025, allows businesses impacted by the July 2025 expansions to register without penalties for late registration or initial non-compliance, provided they rectify their status within the window.
Which goods and sectors are exempt or zero-rated as essential or protected?
Essential goods commonly exempt include staple foods like rice, local fish, basic medicines, and educational materials such as books. Certain protected sectors, like public healthcare and qualifying education services, receive exemption or special treatment under the law.
How are exports treated under SST?
Exports are generally outside the scope of domestic SST and may be zero-rated or exempt, depending on whether sales tax or service tax applies. Exporters should maintain documentation proving the export to support zero-rating or exemption positions.
How do we register for SST via the MySST portal?
Use the MySST online portal to apply. Prepare company information, business registration documents, product or service descriptions, and turnover figures. Submit the application online and await the approval letter with your registration number and effective date.
What information is required on the MySST portal?
You will need your business registration number, company details, addresses, bank details, nature of business, expected taxable turnover, and descriptions of taxable goods or services. Accurate turnover projections and supporting documents help speed approval.
What happens after approval: registration number and effective date?
Customs issues an approval letter, a registration number, and the effective registration date. You must start charging tax from the effective date and file returns for the relevant taxable periods thereafter.
What are deadlines tied to threshold breaches?
Deadlines require registration within a set number of days after crossing the threshold or upon reasonable expectation of crossing. Late registration risks penalties, though transitional grace periods may apply for certain updates.
What are the accounting, invoicing, and record-keeping rules after registration?
Registered persons must maintain proper books, issue compliant invoices showing tax amounts where applicable, and keep records for seven years. Accounting treatment must reflect whether sales or service tax applies and which taxable period the supply falls into.
How does timing differ between sales tax and service tax for accounting?
Sales tax often applies at manufacture or importation, while service tax applies when the taxable service is performed or invoiced. Specific rules govern accrual versus payment recognition; consult guidance to align accounting with tax periods.
What invoice requirements and languages are allowed?
Invoices should include supplier details, registration number, description of goods or services, taxable amount, and tax amount. Bahasa Malaysia and English are generally accepted; ensure readability and compliance with Customs format rules.
How long must we keep SST records?
Records and supporting documents must be retained for seven years from the end of the relevant year. Proper documentation supports returns, audits, and any claims for exemptions or zero-rating.
What are penalties for non-compliance, non-submission, and non-payment?
Penalties include fines for failure to submit returns or pay taxes, assessment adjustments, and possible prosecution for serious breaches. Administrative penalties escalate with continued non-compliance and can include interest on unpaid amounts.
How do late payment tiers work: 10%, 15%, up to 40%?
Late payments can attract additional charges calculated as percentages of the unpaid tax. Tiers escalate from initial surcharges (for example 10%), through higher penalties (such as 15%), up to a maximum aggregate penalty (commonly capped around 40% depending on the default period and statutory rules).
What rules apply to foreign companies and when must they register?
Foreign entities providing taxable services in Malaysia or importing taxable goods may have registration obligations if they carry on business or have a taxable presence. Non-resident service providers must register if they supply prescribed services here and meet turnover or transactional thresholds.
Disclaimer:
The information shared in this post is for general educational and reference purposes only. It does not constitute professional advice. Regulations and requirements may change from time to time. For guidance specific to your situation, please consult with our firm or a qualified professional.
