We open with a clear summary of how the recent changes affect your cost base and margins. From 26 February 2024 and with policy updates on 29 March and 23 August 2024, the scope under Group J clarified that certain logistics services are in scope while protections for Special Areas, Designated Areas, and free zones were reinstated.
The service tax remains an indirect tax collected by providers and remitted to the Royal Malaysian Customs Department. You are responsible for collecting and forwarding the correct amount, and the 6% rate for eligible logistics stands apart from the 8% rate applied to most other services since March 2024.
In this section we set expectations: how tax flows through multi-leg operations, where registration and compliance obligations arise, and which exemptions can reduce costs legally. We present pragmatic actions you can take now—review contracts, update SOPs, and tighten invoicing controls—to limit audit risk and prevent cascading charges.
Key Takeaways
- The 2024 updates clarified scope and reduced double taxation for cross-border operations.
- You must collect service tax and remit it to the Malaysian Customs Department timely.
- Logistics services may remain at 6% while most services moved to 8% in 2024.
- Review contracts, registration, and billing to maintain compliance and avoid penalties.
- Area-based exemptions and correct structuring can lower your effective cost.
Essential context for 2025: How service tax affects logistics operations in Malaysia
The 2025 context demands a clear map of where service charges carry tax and where exemptions apply. We distinguish between sales tax on goods at manufacture or import and the separate levy that applies to prescribed services.
From March 2024 most services rose to 8%, but essential sectors remain at 6%. RMCD’s Guidelines (effective 26 Feb 2024) and Policy No. 4/2024 (amended 23 Aug) define Group J scope and refine exemptions to limit cascading costs.
We translate those rules into operational checkpoints you can use today. Identify which line items from first-mile to last-mile are a subject service tax at 6% and which are zero-rated or exempt.
- Map taxable activities: port handling, warehousing, haulage and multi-leg movements.
- Prevent misclassification: service vs goods mislabels inflate landed costs.
- Embed tax logic into ERP and SOPs so each service line is taxed in real time.
Finally, maintain robust documentation for interactions with malaysian customs and other authorities. Clear evidence lets you operationalize exemptions and reduce audit exposure while keeping pricing competitive.
Current scope and rates for logistics services under SST
We present a clear roster of covered activities and the practical rate differences you must apply. Use this to map each revenue line and to adjust quotes, invoices, and system charge codes.
Group J coverage
Group J includes courier, warehousing and warehouse management, customs agent services, port airport operations, shipping, air freight, cold chain, and broader logistics management. RMCD guidance confirms warehousing and customs agent services are taxable under this group.
Service tax rates at a glance
The applicable rate for covered logistics services is 6%. Most other services moved to 8% from March 2024. Apply the correct rate per invoice line to prevent disputes and margin erosion.
Common exclusions and invoice practice
Certain delivery services are excluded. For example, a food delivery service provided directly by a restaurant to its own customers is not subject to service tax.
| Service category | Typical treatment | Rate | Notes |
|---|---|---|---|
| Warehousing & storage | Taxable | 6% | Includes inventory management and handling |
| Customs agent services | Taxable | 6% | Guidance confirms inclusion under Group J |
| Restaurant-owned delivery | Exempt | 0% | Delivery service by the restaurant to its customers |
| Port airport charges | Generally taxable | 6% | Area-based exemptions may apply |
- Map each charge code to the correct tax treatment in your billing system.
- Separate bundled offerings into discrete items so the subject service tax base is clear.
- Train frontline teams to flag exempt delivery service scenarios to avoid overcharging.
Key exemptions reshaping costs: Special/Designated Areas, free zones, and B2B relief
Area status — not activity alone — often decides whether a service attracts service tax. Under the revised rules, services listed in Group J performed in or between Special Areas (SA) and Designated Areas (DA) are generally not subject to the subject service tax. This creates clear cost advantages for hubs operating inside these zones.
Special Areas and Designated Areas: how location drives tax treatment
SA include Free Zones (FIZ, FCZ), Licensed Warehouses (s.65), Licensed Manufacturing Warehouses (s.65A) and the Joint Development Area. When a movement begins and ends within these zones, the covered services are not taxable. Tagging jobs correctly is essential to claim relief.
Free zones and reinstated exemptions within and between SA/DA
The 29 March 2024 policy and the 23 August amendment reinstated exemptions for movements within and between SA and DA. Keep movement docs, permits, and zone declarations in each job file as evidence.
Ocean freight charge exemptions for Peninsular–Sabah/Sarawak/Labuan routes
Ocean freight between Peninsular and Sabah, Sarawak or Labuan, and among Sabah, Sarawak and Labuan, is exempt from service tax. Structure sea freight invoices to separate ocean charges from taxable landside activities.
Merged Items 1(a) and 1(b): expanded B2B exemption scope
The merger of Items 1(a) and 1(b) widens B2B relief. Qualified providers acquiring delivery, distribution or transport from third parties can now claim exemption more broadly. Update purchase workflows and supplier invoices to reflect this change.
Customs agent services remain taxable despite area-based exemptions
Important: customs agent fees continue to be taxable even when other Group J services are exempt. We recommend segregating customs agency lines on invoices and maintaining dedicated supporting documents to protect exemption claims elsewhere.
- Action: implement location codes, preserve zone paperwork, and separate invoice lines for customs agency and terminal services.
- Action: revise contracts to allocate responsibility for documentary evidence and to reflect restored exemptions since March 2024.
| Issue | Effect | Action |
|---|---|---|
| SA/DA movement | Not subject service tax | Tag job; file zone documents |
| Ocean freight (Pen–Sab/Sar/Lab) | Exempt | Separate sea freight lines |
| Customs agent fees | Taxable | Invoice separately |
Import and export logistics: practical tax treatments and preferred Incoterms
Correct documentation and single-provider billing unlock key exemptions for international door-to-door moves. To claim the store-door exemption, one provider must sell the international freight and the landside delivery. The landside leg must appear on the same BL/AWB and the provider must issue a single invoice.
Store-door and single-document rules
When the same AWB/BL/CN covers consignor-to-consignee and one invoice is used, the landside element can be non-taxable as part of the international carriage. Keep the single transport document and invoice in the job file as evidence for RMCD checks.
Cross-border trucking and transit
Cross-border trucking qualifies if one continuous transport uses a single CN and one invoice. Transit activities from arrival at a port or airport until exit are not subject to service tax; maintain arrival and exit stamps to support non-taxable treatment.
Warehousing in Special Areas and Incoterms strategy
Warehousing and consolidation hubs inside Special Areas or between Designated Areas are generally exempt when movements stay within zone boundaries. UseFCAfor exports andDAPfor imports to align who pays and who is invoiced. Billing the foreign counterparty often removes local tax exposure.
- Operational checklist: single invoice, single transport doc, separate customs clearance lines, and clear job costing templates for freight forwarding and management services.
sst logistics malaysia: registration thresholds, who must register, and timing
When your twelve‑month billings breach the RM500,000 threshold value, you must register without delay. This rolling calculation uses gross receipts for prescribed services and follows the published rules.
Threshold and taxable person
Threshold: RM500,000 over any rolling 12 months triggers registration. Compute continuously and include all chargeable services to avoid surprises.
Who is taxable: Providers in Group J that offer prescribed logistics services are taxable persons once the threshold is hit. Service tax becomes due on the earlier of supply or invoice date.
MySST flow and timing
Apply via the MySST portal, upload required documents, and await approval with an effective date. Submit registration to the RMCD no later than the last day of the following month after exceeding the threshold.
- Charge and issue compliant invoices from the effective date.
- File sst returns, pay amounts to the customs department, and keep maker‑checker controls for responsible collecting and remitting.
- Update ERP so that when your company provides mixed services the system segments taxable versus exempt lines automatically.
| Item | Action | Deadline |
|---|---|---|
| RM500,000 threshold | Monitor rolling 12 months | Ongoing |
| Registration submission | Apply via MySST; receive registration no. | By last day of following month |
| Post‑registration | Charge, file sst returns, remit to customs department | Per monthly filing cycle |
Compliance in 2025: e-Invoicing, documentation, and penalties to avoid
Timely filings and accurate e‑invoicing are the first line of defense against audits and fines in 2025. We focus on practical controls that keep your records aligned with statutory requirements and third‑party data feeds.
e-Invoicing linkage and data sharing
Import sales must carry the K1 reference on the e‑invoice. The IRBM shares e‑invoice records with the malaysian customs department under ITA s.138(4)(aa).
Ensure K1 codes appear on import lines and that invoice data matches your service tax declarations to avoid reconciliation flags.
Penalties and late payment bands
Failure to submit returns or pay can attract fines up to RM50,000 and possible imprisonment up to three years.
| Delay | Penalty |
|---|---|
| 1–30 days | 10% |
| 31–60 days | 15% |
| 61–90 days | 15% |
| 91+ days | Up to 40% |
Practical steps to protect your business
We recommend these immediate actions to maintain compliance and tax compliance:
- Align e‑invoicing: embed K1 refs, reconcile daily, and link to sst returns.
- Single‑invoice practice: keep one invoice for door‑to‑door jobs to preserve exemptions.
- Documentation: store BL/AWB/CN, SA/DA proofs, and job files in an auditable folder.
- Controls: set approval cutoffs for payments and run mock audits ahead of July 2025.
- Contracts: add clauses that allocate tax responsibilities and require customer documents.
Adopting these measures reduces dispute risk and keeps your service tax filings accurate. We can help implement the controls matrix and test readiness before any RMCD review.
What changed since March 2024 and August 2024: policy updates at a glance
Regulatory amendments now prioritise area status when deciding taxable versus exempt services. Policy No. 4/2024 (29 Mar 2024) and the 23 Aug 2024 amendment expanded exemptions for movements within and between Special Areas (SA) and Designated Areas (DA).
Wider exemptions to curb cascading effects and protect competitiveness
We note the merger of Items 1(a) and 1(b) widened B2B relief, reducing embedded tax in supplier chains. Ocean freight between Peninsular and Sabah, Sarawak and Labuan is now exempt; separate sea‑freight lines in your rate cards to capture the saving.
Area-based clarifications and continued taxability for Customs clearance
Guidelines effective 26 Feb 2024 set Group J scope and the amendments confirm customs agent fees remain taxable. Always invoice customs clearance separately to preserve exemption claims for other service lines.
- Keep BL/AWB/CN and zone paperwork ready for RMCD and malaysian customs checks.
- Track communications on sales service tax and update SOPs ahead of july 2025 reviews.
- Use a policy tracker so finance can model before/after savings by lane type.
| Change | Effect | Action |
|---|---|---|
| Merge Items 1(a)/1(b) | Wider B2B relief | Revise supplier invoices and reclaim embedded tax |
| Area-based exemptions | SA–SA, SA–DA, DA–DA often exempt | Tag jobs; file zone proofs |
| Customs clearance | Remains taxable | Invoice separately; retain clearance docs |
Conclusion
This final summary sets out the practical steps you must take now to embed correct service charging and limit audit exposure.
Under current rules, sales service tax for most logistics services is charged at 6%. Area-based exemptions for Special Areas and Designated Areas are reinstated, while customs agent fees remain taxable.
Verify registration against the RM500,000 threshold, apply FCA for exports and DAP for imports, and keep store-door and single-transport docs to support exemptions.
Strengthen e-Invoicing with K1 references for imports, separate customs agency lines, and update contracts so the company provides clear responsibilities on subject service tax.
We can review your tax logistics setup and help you quantify value at risk, tighten controls, and stay ready for the July 2025 evolution in adjacent sectors.
FAQ
What services in Group J are subject to service tax for transport and supply-chain activities?
Group J covers a broad range of services relevant to freight and supply-chain operations: courier and parcel services, warehousing and storage, port and airport handling, shipping agency services, air freight, cold chain distribution, and logistics management. Customs clearance and freight forwarding services are also generally taxable, even when provided in Special or Designated Areas.
What is the current service tax rate for transport and related services?
The prevailing service tax rate for most logistics-related services is 6% for specified transport and supply-chain services, while other services may attract an 8% rate. Always verify the exact classification, because certain activities or bundled services can change the applicable rate.
Which logistics activities are explicitly excluded or exempt from service tax?
Exemptions include specific food delivery by restaurants in some cases, ocean freight for certain routes between Peninsular and Sabah/Sarawak/Labuan, and defined inter-area movements when criteria are met. B2B supplies under merged Items 1(a) and 1(b) in Group J expand relief where services are supplied between taxable enterprises and meet documentation rules.
How do Special Areas, Designated Areas, and free zones affect tax treatment?
Location matters. Services performed within designated areas may be exempt or enjoy relief, subject to strict conditions. Free zones and reinstated exemptions permit zero-rating or exemption for qualifying movements within and between Special/Designated Areas, but services like customs agent work typically remain taxable.
Are customs clearance and customs agent fees taxable?
Yes. Despite area-based exemptions, customs clearance and agent services remain subject to service tax. These services are treated as taxable supplies and should be accounted for in returns unless a specific statutory exemption applies.
How should businesses structure cross-border trucking and multimodal transport to qualify for exemptions?
To meet exemption rules, aim for a single transport leg documented with one consignment note (CN) and a single invoice. Consolidate billing for the entire cross-border movement and ensure clear evidence that the transport links to international freight or store-door conditions tied to exports/imports.
What warehousing arrangements can qualify for relief in Special Areas?
Warehousing and multi-consolidation hubs located inside approved Special Areas may be exempt when goods remain under customs control and services are part of an international supply chain. Proper separation of domestic storage from international consolidation and clear records are essential.
Which Incoterms help optimize tax outcomes for exports and imports?
For exports, FCA (Free Carrier) often supports tax-efficient treatment by clarifying export handover. For imports, DAP (Delivered at Place) can simplify landside delivery responsibilities. Choose terms that align liability and documentation with exemption criteria.
When must a transport or freight company register for service tax?
Registration is required once taxable supplies of transport and related services exceed RM500,000 in any consecutive 12-month period. Entities providing taxable agent, warehousing, or forwarding services should monitor turnover and register via the MySST portal when thresholds are reached.
Who qualifies as a taxable person and when does tax become due?
A taxable person is any entity carrying on a taxable business of providing chargeable services. Tax becomes due at the time of supply or invoice issuance, depending on the transaction and invoicing practices; businesses must account for tax in the relevant tax period and on their SST returns.
How does MySST registration affect effective dates and compliance timing?
MySST registration establishes your effective date for filing and payment obligations. Registration processing and declared effective dates determine the starting period for returns. Register promptly once thresholds are met to avoid late-registration penalties.
What are the e-invoicing and reporting requirements for service providers?
Providers must align invoicing with e-invoicing linkage standards, including K1 references where required. Data-sharing with the Royal Malaysian Customs Department (RMCD) supports auditability. Maintain electronic records that map to tax invoices and consignment documentation.
What penalties apply for non-filing, non-payment, or late payments?
Penalties escalate for non-compliance: late filing and payment attract surcharges (typically 10% or 15%), with aggravated cases reaching up to 40% depending on duration and intent. Interest and additional fines may also apply. Prompt filing and payment are essential to limit exposure.
What practical steps reduce risk in contracts, invoicing, and record-keeping?
Adopt clear contract clauses that allocate tax responsibility, issue single invoices for single transport movements, keep consolidated consignment notes, and store supporting documentation for audits. Regularly review price lists to ensure service tax is applied and disclosed correctly to customers.
What changed since March and August 2024 that affects current practice?
Recent policy updates expanded exemptions to reduce cascading taxes and protect competitiveness. Regulators clarified area-based rules and reinforced that customs clearance services remain taxable. These changes aim to simplify cross-border treatment and narrow unintended tax burdens.
How do ocean freight exemptions apply for Peninsular–Sabah/Sarawak/Labuan routes?
Ocean freight charges between Peninsular and Sabah/Sarawak/Labuan can be exempt when the movement meets specific statutory criteria. Documentation proving the route and the international nature of the carriage is required to sustain the exemption.
Are B2B supplies always exempt under the merged Items 1(a) and 1(b) in Group J?
Not always. The merged items broaden B2B relief where services are supplied between taxable persons and meet documentary and contractual requirements. Each transaction must be evaluated against the rules to confirm exemption eligibility.
How should businesses handle tax treatment for bundled services like management, leasing, or rental?
Bundled offerings must be dissected: identify taxable elements such as management services, equipment rental, or storage fees. Apply the correct classification and rate to each component and document the apportionment to support returns and audits.
What role do late payments and interest play in overall liability management?
Late payments increase total liability through surcharges and interest. Implement robust billing and collections, reconcile SST returns monthly, and use escrow or advance payment clauses where appropriate to manage cash flow and mitigate penalties.
Where can businesses get authoritative guidance and updates?
Consult the Royal Malaysian Customs Department notices and the MySST portal for official guidance. For complex arrangements—cross-border trucking, bonded warehouses, or multi-jurisdictional supply chains—seek advice from tax advisors specializing in indirect tax and customs. We can assist in reviewing contracts, registration, and compliance processes.
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.
