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SST Malaysia 2025: Key Changes,
New Tax Rates & How Businesses
Can Stay Compliant

When Malaysia’s government introduced sweeping changes to the Sales and Service Tax (SST) framework effective July 1, 2025, it sent shockwaves through the business community. With new taxable sectors, expanded coverage, and increased rates, these changes affect nearly every industry — from education and healthcare to leasing, property, and personal care.

Understanding how these updates impact your operations isn’t just about compliance — it’s about protecting your bottom line.

What’s Changing Under the 2025 SST Amendments

Between June 9 and June 30, 2025, 8 new legal gazettes and five new service tax policies were announced, reshaping how SST applies to goods and services in Malaysia.

Key Legal Updates:

Service Tax (Amendment) Regulation 2025
Sales Tax (Goods Addendum) Amendment Order 2025
Sales Tax (Tax Rate) Amendment Order 2025

What It Means:

Sales Tax now applies more widely to luxury and non-essential goods, taxed at 5% or 10%, covering over 3,000 new items.
Service Tax coverage has expanded to six new sectors, many of which were previously exempt.

Even though sales tax applies at the manufacturing or import stage, end consumers will inevitably face higher costs — a ripple effect businesses must prepare for.

6 New Sectors Under Service Tax 2025

The latest update brings 6 new industries into the Service Tax net. Here’s a breakdown of what’s new:

Sector	Group Code	Tax Rate	Key Highlights
Education	M	6%	All private education institutions must comply — no income threshold. Applies to tuition, registration, and miscellaneous fees. Must register by Aug 31, 2025.
Healthcare	I	6%	Applies only to non-citizen patients. Threshold: RM15 million annual revenue.
Construction	L	6%	Applies to non-residential and mixed-use projects. Residential and public projects are exempt.
Wellness/Care Centres	C	8%	Applies to massage, acupuncture, and traditional wellness services.
Finance	F	8%	Covers commission-based financial services like investment, brokerage, or insurance. Core banking remains exempt.
Leasing/Rental	N	8%	Applies to tangible asset leasing and property rental with annual income over RM1 million.

Each sector must now assess whether their services fall within taxable categories and determine if registration thresholds apply.

Service Tax on Rental Income: What Landlords Need to Know

Starting July 1, rental and leasing services are subject to Service Tax — but only under specific conditions.

✅ You may not need to charge 8% if:

It’s residential property (housing or accommodation).
It involves reading materials or publications.
It’s a foreign asset leased from abroad.
It’s a finance lease (classified under financing rather than rental).

❌ You must charge 8% if:

Your rental income exceeds RM1 million within any 12-month period.
You rent out commercial or mixed-use properties rather than purely residential.
Once registered, you must issue tax invoices to tenants and charge the 8% Service Tax accordingly.

Key Exemptions Under the 2025 Policies:

SME Exemption: No 8% tax if tenant qualifies as an SME (via MyPNK).
Non-Reviewable Contracts: Contracts signed before 9 Jan 2025, stamped by LHDN, enjoy a one-year exemption (till 30 Jun 2026).
Government & Local Authority Rentals: Exempt until 30 Sept 2025 if leased to central or state government or local authorities.
Group Relief: Inter-company rentals within the same corporate group may qualify for exemption if conditions apply.
Aircraft & Ship Rentals: The new 2025 addition officially exempts aircraft and ship rentals from Service Tax.

The Real Impact: Rising Costs and Stricter Compliance

The new SST framework doesn’t just change paperwork — it reshapes how businesses price, bill, and manage cash flow.

Thinner Margins: Manufacturers face higher input costs, while service providers in construction, finance, or wellness must decide whether to absorb or pass on the 8% Service Tax.
Tighter Cash Flow: More frequent tax submissions and shorter payment windows increase pressure on working capital.
Pricing & Contracts: All affected sectors must review invoices and agreements to reflect the new rates and tax codes.
Reputation Risk: Sudden price hikes without clear communication can erode client trust, especially in education and healthcare.

⚠️ Critical 12-Month Rule:

Even if a service invoice remains unpaid for over 12 months, Service Tax is still due. For Sales Tax, liability starts upon invoice issuance — regardless of payment.

SST Configuration Guide: How to Automate Tax Compliance with Your Accounting System

With the evolving SST structure, relying on manual spreadsheets or ad-hoc processes is risky.

Modern accounting systems such as UBS, SQL, and AutoCount — simplify compliance when properly configured for SST

Here’s how SST configuration supports each key function:

a. Automated SST / Service Tax Categorisation

Systems can auto-assign correct SST codes (e.g., 5%, 6%, 8%, 10%) based on goods or service type.
Ensures consistent and accurate tax rate application across transactions.
Relies on correct SST configuration — where taxable items, exemptions, and rates are defined in advance.
Prevents manual misclassification that could trigger LHDN red flags or incorrect tax filing.

b. E-Invoice & MyInvois Integration

Many systems connect directly to the MyInvois portal, automating compliant invoice submissions to LHDN.
Reduces human error and repetitive data entry.
Proper SST configuration ensures:
→ Each invoice carries the correct SST code and rate.
→ Tax data aligns with LHDN’s validation structure.
→ Prevents invoice rejections or mismatched codes during transmission.

c. Real-Time SST Reporting

Enables instant SST liability reports, showing total taxes payable, invoice status, and submission deadlines.
Supports better cash flow and compliance planning.
Requires correct configuration of:
→ Tax categories and exemptions, so reports reflect true liabilities.
→ Threshold and period settings, ensuring timely SST return submissions.
Helps prevent penalties, interest charges, or delayed filings.

d. Multi-Entity SST Management

Ideal for landlords, developers, or group companies handling multiple business units.
Allows consolidation of multiple entities, properties, or tenants into one SST dashboard.
Correct SST configuration ensures:
→ Each entity has its own SST profile and rate structure.
→ Exemptions and thresholds are applied independently and accurately.
→ Reports remain entity-specific yet compliant under one system.

e. Audit-Ready Documentation

Provides digital audit trails, with archived invoices, SST reports, and tax history — all timestamped.
Simplifies audit preparation and verification for LHDN or Customs.
SST configuration determines:
→ How tax logic and rules are applied per transaction.
→ How reports and documents are classified, stored, and retrievable.
Builds transparency and confidence during compliance reviews.