The ministry said basic necessities will continue to be exempted from sales tax, but a 5-10% rate will be imposed on non-essential items.
The scope of the service tax will meanwhile be expanded to several areas.
Here is the finance ministry’s list of goods and services affected:
Sales tax
1. 0%
Essential goods like chicken, beef, mutton, fish, prawns, squid, vegetables, local fruits, rice, barley, oats, wheat, flour, canned sardines, sugar, salt, white bread, pasta, noodles, instant noodles, milk, cooking oil, medicine, medical devices, books, journals, newspapers and pet food.
Basic materials for construction like cement, stones and sand, as well as items for the agricultural sector like fertilisers, pesticides as well as agricultural and livestock machinery.
2. 5%
Certain goods such as king crabs, salmon, cod, truffles, imported fruits, essential oils, silk and industrial machinery.
3. 10%
Certain goods such as road bicycles and antique hand-painted artworks.
Service tax
1. Rental or leasing services
Tax rate of 8% on all service providers whose rental or lease income exceeds RM500,000.
Exemptions:
a) Leasing or rental of residential buildings, reading materials, financial leases and tangible assets outside Malaysia.
b) Lessees that are micro, small and medium enterprises (MSMEs) with annual sales under RM500,000.
c) Business-to-business (B2B) transactions and group relief to avoid double taxation.
d) Twelve-month exemption for non-reviewable contracts from the date of the 8% service tax’s implementation.
2. Construction services
Tax rate of 6% for service providers with a threshold of RM1.5 million.
Exemptions:
a) Residential buildings and public amenities related to housing.
b) B2B transactions to avoid double taxation.
c) Twelve-month exemption for non-reviewable contracts from the date of implementation of the 6% service tax.
3. Financial services
Tax rate of 8% on fee- or commission-based financial services.
Exemptions:
a) Basic financial services for Malaysians, including basic banking and interest- or profit-based Islamic financing.
b) Foreign exchange and capital market gains, punitive fees or charges, outward remittances from Malaysia, financing facilities directly related to exports, charges to overseas remittance agents for inbound transfers, and brokerage or underwriting services related to life, medical and family insurance/takaful.
c) B2B transactions to avoid double taxation, shariah-compliant fee arrangements, and service providers for Bursa Malaysia and Labuan.
4. Private healthcare services
Tax rate of 6% for private healthcare, traditional and complementary medicine, and allied health services provided to foreigners, on service providers exceeding the RM1.5 million threshold.
5. Education services
Tax rate of 6% for private preschool, primary and secondary education providers with annual tuition fees exceeding RM60,000 per student.
Exemptions:
a) Disabled Malaysian students.
The same rate applies for private higher education institutions for international students, with all Malaysians exempted.
6. Beauty services
Tax rate of 8% for taxable services exceeding RM500,000 in a 12-month period, such as facial treatments and hairdressing.