KUALA LUMPUR, October 18 — The federal government is expanding the scope of the Sales and Service Tax (SST) to further improve the nation's tax revenue in the Budget 2025.

The expansion will be implemented starting May 1, 2025.

Here are the key points from Prime Minister Datuk Seri Anwar Ibrahim’s speech on how this will work:

• The sales tax will be increase on non-essential items such as imported premium goods like salmon and avocado.
• The sales tax exemption will be maintained for basic food items.

Simultaneously, the service tax will be expanded to now include commercial service transactions between businesses (B2B) that were previously exempted.

These will join sectors already covered such as

• Manufacturers
• Importers
• Logistics and delivery services
• E-platforms

However, the government will conduct engagement sessions with stakeholders and relevant industries before finalising the scope of expansion and the new tax rates.

Currently, the Malaysian government imposes a sales tax on both goods made in Malaysia and imported goods, with the sales tax rate at five per cent or 10 per cent or specific rates depending on type of goods. Goods such as essential items are exempt from sales tax.

Who will benefit from the tax expansion?

Part of the revenue will be used to further improve cash assistance to the people.

It will also go to improve the quality of healthcare and educational services.

On March 1, 2024, the Malaysian government increased the service tax rate from six per cent to eight per cent across various sectors, except for services such as food and beverage, telecommunications, parking and logistics where the service tax remains at six per cent.