Malaysia expands service tax to rental, construction, finance, healthcare and education from 1 July 2025
This page records one dated change. For the rules in Malaysia as they stand today, see the Malaysia guide →
- Jurisdiction
- Malaysia
- Tax
- Service Tax / Sales Tax
- Change type
- Rate change
- Status
- In force
- Impact
- FYI
- Announced
- 9 June 2025
- Effective
- 1 July 2025
- Instrument
- MY-SUBSIDIARY-LEGISLATION-P-U-A-172-2025
- Authority
- Attorney General's Chambers, Malaysia (Warta Kerajaan Persekutuan / Federal Gazette)
- Verified
- Fetched from official source · high confidence
Malaysian providers of rental or leasing (RM500,000 threshold), construction works (RM1.5 million), fee-based financial services, private healthcare and private education, plus manufacturers and importers of goods moved to the 5% or 10% sales tax rates.
No action — monitoring only. Changes are in force. For rental/leasing (Group K), the rate was subsequently reduced to 6% by P.U.(A) 125/2026 effective 1 January 2026 (see my-service-tax-rental-6pct-pua-125-2026).
A package of subsidiary legislation gazetted on 9 June 2025 (made 5 June 2025) widened Malaysia's Sales and Service Tax (SST) from 1 July 2025, implementing Budget 2025 (18 October 2024). The Service Tax (Amendment) Regulations 2025 [P.U.(A) 172/2025] rewrote Group H (finance: credit/charge cards, insurance and takaful, and fee- or commission-based financial services), added private healthcare services to Group I, and inserted three new groups: Group K (rental or leasing of tangible assets, RM500,000 threshold, excluding housing accommodation), Group L (construction works, RM1,500,000 threshold, excluding residential buildings) and Group M (education: private schools charging over RM60,000 per student a year, and education services to non-citizens). The Service Tax (Rate of Tax) (Amendment) Order 2025 [P.U.(A) 173/2025] replaced paragraph 3 of the rate order: 8% on all taxable services, except 6% on a new First Schedule (food and beverages, telecommunications, parking, logistics, healthcare, traditional and complementary medicine, allied health, construction works, education) and RM25 per card on credit/charge cards. Rental or leasing therefore started at 8% (cut to 6% from 1 January 2026 by P.U.(A) 125/2026). The Sales Tax (Rate of Sales Tax) Order 2025 [P.U.(A) 170/2025] and Sales Tax (Goods Exempted From Sales Tax) Order 2025 [P.U.(A) 171/2025] keep 10% as the general sales tax rate with 5% on First Schedule goods, while essential goods stay exempt. The Ministry of Finance said no prosecution or penalties would be imposed until 31 December 2025 on companies taking steps to comply.
What changed in detail
A package of subsidiary legislation made on 5 June 2025 and gazetted on 9 June 2025 widened Malaysia’s Sales and Service Tax (SST) from 1 July 2025, implementing Budget 2025.
The Service Tax (Amendment) Regulations 2025 [P.U.(A) 172/2025] amend the First Schedule to the Service Tax Regulations 2018:
- Group H (finance) is rewritten to cover credit and charge cards, insurance and takaful, and fee- or commission-based financial services.
- Group I adds private healthcare services.
- New Group K taxes rental or leasing of tangible assets, with a RM500,000 threshold and housing accommodation excluded.
- New Group L taxes construction works, with a RM1,500,000 threshold and residential buildings excluded.
- New Group M taxes education: private schools charging more than RM60,000 per student a year, and education services to non-citizens.
The Service Tax (Rate of Tax) (Amendment) Order 2025 [P.U.(A) 173/2025] sets 8% on all taxable services, except 6% on a new First Schedule (food and beverages, telecommunications, parking, logistics, healthcare, traditional and complementary medicine, allied health, construction works and education) and RM25 per card on credit and charge cards. Rental and leasing therefore started at 8%.
On sales tax, P.U.(A) 170/2025 and P.U.(A) 171/2025 keep 10% as the general rate, with 5% on First Schedule goods and essential goods exempt. The Ministry of Finance said no prosecution or penalty would be imposed until 31 December 2025 on companies taking steps to comply.
What it means
This was one of the broadest widenings of Malaysian SST since its 2018 reintroduction, and it is in force. The grace period ended on 31 December 2025. One part has already moved: rental and leasing went to 6% from 1 January 2026 under P.U.(A) 125/2026. Customs has also issued a series of service tax policies narrowing Groups K and L, such as those on residential construction and joint rental thresholds. A business in the new groups should check the current policy documents as well as these Regulations.
Proof
These Regulations come into operation on 1 July 2025.
Source snapshot of the official page. Open full size ↗Archived from the official distribution · P.U.(A) 172/2025 — Service Tax (Amendment) Regulations 2025 (Federal Government Gazette, 9 June 2025) · lom.agc.gov.my
Sources
- Service Tax (Amendment) Regulations 2025 [P.U.(A) 172/2025] — Federal Government Gazette
- Service Tax (Rate of Tax) (Amendment) Order 2025 [P.U.(A) 173/2025] — Federal Government Gazette
- Sales Tax (Rate of Sales Tax) Order 2025 [P.U.(A) 170/2025] — Federal Government Gazette
- Targeted revision of sales tax rate and expansion of service tax scope effective 1 July 2025 — Ministry of Finance Malaysia press release