What Is Sales Tax Malaysia? A Complete 2025 Guide for Businesses and Consumers

Any business in Malaysia, as well as its consumers, should be aware of the sales tax. The Sales Tax Act 2018 covers all taxable goods produced locally as well as those imported into Malaysia. Since it is charged only at the beginning, during manufacturing or importing, it differs from the Goods and Services Tax (GST) that was taken at each stage of business.

Here, we give you an in-depth explanation of sales tax in Malaysia, covering what is taxed, how much it costs, which items are exempt, how to register, your duties and pitfalls to stay away from.

Sales Tax in Malaysia: Overview and Scope

Under the Sales Tax Act 2018, the Malaysian government has introduced a single-tier sales tax system after the GST was removed. It is only required for goods that are either manufactured here in Malaysia or imported. Services do not face taxes on sales.

The Royal Malaysian Customs Department governs and oversees sales tax, takes care of checks and inspections and ensures audits and enforcement.
Key Characteristics of Sales Tax

• Applies only to the sale of goods, not services
• Single-stage: You pay taxes only on the price the manufacturer gave or on the import price
• Taxes are to be collected and paid by the manufacturer or importer.
• Uses the place of consumption as a basis for imposing tax

Sales Tax Rates in Malaysia

These additional fees apply at the following percentage levels:

• 5% –  For basic and essential items
• 10 % –  Standard rate applied majority of manufactured products 
• Specific Rates – Intended for petroleum, tobacco and alcohol, among others.

Specific goods are taxed for the amount of goods transported, rather than how expensive they are.

Examples of Taxable Goods

• Appliances operating on electricity
• Automotive vehicles and the parts related to their repair
• Both clothing and shoes
• Bathroom supplies and products
• Foods and drinks that have been processed
• Office and school furniture

Goods need to be categorized using the Customs Duties Order to find the correct paying rates for manufacturers and importers.

Goods Exempt from Sales Tax

Some products are exempted by the Sales Tax (Exemption) Order 2018.

• Green, organic and unprocessed agricultural products
• Foods that form the main part of people’s diet (like rice and bread)
• As pharmaceuticals and medical equipment, we strive for excellence in everything we do.
• Youth learning tools and other educational resources
• Items to be delivered abroad

Because Malaysia uses destination-based taxation, goods going abroad are given zero tax.

Sales Tax Registration Requirements

Businesses in the manufacturing sector are to register for sales tax if their taxable sales during the year exceed RM500,000. It applies to businesses that are involved in assembly, packaging, bottling or processing of any kind.

A business that falls below the required income can still register as it chooses.

How to Register for Sales Tax

1. Submit application via MySST portal (https://mysst.customs.gov.my)
2. Add all the needed documents to your application.

•  SSM registration
•  Explanation of business tasks
•  Identification documents

How Sales Tax Should Be Filed and Paid

Registered people involved in manufacturing or importing must:

• You are required to complete and submit SST-02 once every two months (bi-monthly).
• Pay your bill to RMCD within the next month
• Make sure to keep records for at least seven years.

Ignoring tax deadlines results in both fines and possible legal consequences.

When Goods Are Imported, They Are Subject to a Tax

At entry into the country, Malaysian Customs calculates the sales tax on imports. The duty is worked out by adding in the import duties to the CIF price. If the product’s HS Code is applied correctly, customs taxation will be accurate.

Impact of Sales Tax on Consumers

Though consumers do not make sales tax payments, it is built into the cost of what they buy from stores. The additional cost of dealing with cargo moves from the initial supplier through the supply chain to the end user.

Still, getting them exempt or keeping prices low on essential goods keeps them from paying taxes on things they need.

What Does Service Tax Mean in Malaysia?

Malaysia imposes Service Tax, a special type of indirect tax controlled by the Service Tax Act 2018. GST is paid by taxable individuals for certain services they give to customers in Malaysia.

What is the reach of Service Tax?

Service tax is imposed only on services that are mentioned in the law. It is not allowed on any service that is not considered a “taxable service”.

List of All Taxable Services

Subject to tax are the following services:

• Whether you choose to eat in a restaurant, a cafe or hire a caterer.
• Drinks and products made from tobacco
• Firms in the hospitality industry
• The fields of telecommunication and broadcasting services
• Compared to banks and credit unions, insurance and takaful companies
• Professional services:
  • Accountants
  • Lawyers
  • Architects
  • Engineers
  • Consultants

 

Service Tax Rates and Thresholds

• Rate: 6% flat rate
• Threshold: Varies by business type, typically ranging between RM150,000 and RM500,000 annual turnover

For instance:

Service Tax Compliance Obligations

• When they reach the threshold, businesses must register with the tax office.
• File SST-02 returns bi-monthly.
• Take 6% service tax from customers and send it to the Customs Department.
• Make sure to keep all records related to what you charge and how you pay your taxes.

How Service Tax Affects Consumers

An extra charge for service tax can be seen on invoices and receipts. You will charged with the 6% tax at dining or when you pay an accountant.

Because service tax is paid by those who buy, it is better understood than sales tax which is borne by sellers.

For More Information and Official References:

Compliance Tips for SST (Sales and Service Tax)

• Check whether the goods or services you sell are taxable based on the latest SST Orders.
• Review annual turnovers to establish if your company needs to register
• Keep records on your invoices and business transactions properly.
• Make sure to submit your SST returns by the deadline so you won’t be penalized.
• Visit the MySST portal on the RMCD website to find any updates.

 

FAQ

When is the effective date of the new sales tax rate change? Where can I refer to the list of goods affected by the new sales tax rate change? How can I determine if my manufacturing activity meets the definition of manufacturing under the Sales Tax Act 2018? Am I required to register as a registered manufacturer if the finished exempted goods are manufactured subject to the new sales tax rate from exempted goods to taxable goods at a rate of 5% or 10%? How can I register as a registered manufacturer under the Sales Tax Act 2018? Is voluntary registration permitted under the Sales Tax Act 2018? How may I obtain verification as to whether the tariff code of the imported or manufactured goods is subject to a change in the applicable sales tax rate? I have purchased goods from abroad. Although the supplier has not yet shipped the goods, the invoice was issued prior to the effective date of the new sales tax rate. The goods are expected to be imported after the effective date of the new sales tax rate. Will these goods be subject to the new sales tax rate? I am a newly registered manufacturer under the Sales Tax Act 2018. Am I entitled to any sales tax exemptions? What is the process for applying for a sales tax exemption? I am a manufacturer of goods exempt from sales tax and not registered under the Sales Tax Act 2018. On the effective date, the sales tax rate for these finished goods changed from exempt to 5%. Am I required to impose sales tax on the finished goods I manufacture when they are sold on or after the effective date of the new sales tax rate?