Sales Tax vs Service Tax in Malaysia: Differences, Rates and Which One Applies

By Axecta Management Services, Kuala Lumpur · Last verified: 29 October 2026

SST in one paragraph

Sales and Service Tax is two separate taxes, both administered by the Royal Malaysian Customs Department and both handled on the MySST portal. Sales tax sits on goods. Service tax sits on services. A business may owe one, both or neither, and the two are tested against different thresholds, charged at different rates and exempted by different rules. This guide sets them side by side so you can tell which one, if any, your invoices should carry.

The comparison table

Sources: Customs’ understanding SST, sales tax FAQ, service tax FAQ and penalties page.

How sales tax works

Sales tax is a single-stage tax. The Customs page explains that it is charged at one point in the chain: either at import, or when a manufacturer sells or otherwise disposes of the goods. Downstream traders who buy the taxed goods and resell them generally do not charge sales tax again.

Manufacturers and raw materials

A registered manufacturer charges sales tax on taxable goods it sells. To avoid taxing the same inputs twice, Customs’ sales tax FAQ describes exemption schedules: Schedule B for manufacturers of certain non-taxable goods and Schedule C for registered manufacturers, covering raw materials, components and packaging used to make taxable goods. These replaced the older CJ5 forms, according to the FAQ. The exemption has to be applied for and used correctly, which makes it a common audit area.

Exempt goods and persons

The Sales Tax (Goods Exempted From Sales Tax) Order 2018 lists exempt goods such as live animals, unprocessed food, vegetables, medicines, machinery and chemicals, according to the FAQ. Schedule A covers certain persons, including government departments, local authorities and duty-free shops. Whether your goods are covered is a matter of tariff classification, not common sense, so check the order.

How service tax works

Service tax applies to services on Customs’ taxable lists, provided in Malaysia in the course of business. Registered providers charge it to customers and account for it on their return. The taxable service groups on the registering business page run from accommodation, food and beverage, clubs and gaming, professional services, insurance, parking, telecommunications, advertising and logistics, and the 2025 expansion added private healthcare, construction, private education, rental or leasing, financial services and beauty treatment. Our guide on who must register for SST lists them with their thresholds.

Rate changes

The service tax FAQ states that the rate rose from 6 percent to 8 percent on 1 March 2024. Services fully provided before that date stay at 6 percent. Services provided on or after that date are charged at 8 percent, but payments received before that date remain at 6 percent. Food and beverage, logistics, telecommunications and parking stayed at 6 percent.

Contra system and adjustments

The FAQ explains that a registered person may deduct service tax in the return for cancelled or terminated services, and for reductions such as premium or discount adjustments, under the contra system. Credit and debit note adjustments are made in the return rather than by amending a previous one.

Worked example: same business, two lines (illustrative)

A Sdn Bhd manufactures office furniture and also provides interior design consultancy. The rates below use Customs’ published rate structure; the amounts and the 10 percent sales tax rate for the furniture are assumed for the arithmetic only, because the actual rate depends on the goods.

Each tax goes on its own invoice lines. The furniture side is tested against the RM500,000 manufacturer threshold. The design side is tested against the threshold for its service group. Neither test is based on the other’s turnover. The company files one Form SST-02 per period with both parts completed.

What this means for your books

Customs describes sales tax as a single-stage tax, charged at one point rather than at every step of the chain, and it states the service tax rate history from 1 September 2018 on its background page. Practically:

• Treat SST you pay on purchases as a cost unless Customs’ rules give you a specific relief or exemption. Do not assume a recoverable input tax, as under a value-added tax; confirm with Customs or an adviser.
• Registered manufacturers can reduce the cost of inputs through the Schedule B and C exemptions above.
• A service business that buys taxable goods bears the sales tax in the price and does not charge sales tax itself.

If your accounting system treats tax as recoverable input tax, the tax codes need review. See outsourced accounting services if you need to reset them.

Which tax applies? A decision checklist

1. Do we make goods in Malaysia, or import them? If yes, check whether those goods are taxable under the sales tax orders.
2. Do we provide any service that matches a Customs taxable group? If yes, identify the group.
3. Is the rolling 12-month taxable value above the threshold for each?
4. Are any customers, goods or locations exempt (for example a Designated Area or Special Area)?
5. Do we buy services from overseas that might be taxable on import?
6. Have we recorded the answers and the date in a file note?

Common confusions

• Thinking “I sell to other companies, so SST does not apply”. The service tax FAQ does not mention a general business-to-business exemption. Look at the service and the exemption lists.
• Charging sales tax on a pure service because the invoice mixes goods and labour. Separate the two on the invoice.
• Assuming that a retailer or trader charges sales tax on goods it merely resells.
• Treating both taxes as one registration. Sales tax and service tax each have their own threshold test.
• Applying 8 percent to food and beverage or logistics, which stay at 6 percent.
• Forgetting that e-invoicing is a separate regime. SST registration does not decide whether your company must issue e-invoices. See whether your Sdn Bhd needs e-invoicing.

Documenting your position

Keep a one-page memo: activity, which tax or taxes apply, the group and rate, the threshold test, the date of registration and the return period. Update it when you add services or new product lines. It is the first document an adviser or an auditor will ask for.

How Axecta helps

Axecta’s tax team classifies each product and service against the Customs lists, advises on exemption applications, sets up the correct tax codes in your accounting system and files the bimonthly return. Our SST registration and returns service is designed for owners who do not want to read the schedules themselves.

Next steps

1. Write down your product and service lines.
2. Use the checklist above to decide which tax each line attracts.
3. Test thresholds with the registration threshold guide.
4. Read how to file the return before your first period.
5. Review the position whenever you launch a service or change supplier.

Frequently asked questions