In Budget 2026, Malaysia’s government has introduced several updates to the Sales and Service Tax (SST) framework, aiming to enhance revenue collection while minimizing the impact on businesses and consumers.
1. Implementation of 8% Service Tax on Commercial Property Rentals
Starting from July 1, 2025, an 8% Service Tax is imposed on commercial property rentals. This move is part of the government’s strategy to broaden the tax base. However, industry associations such as the Malaysia Retail Chain Association and the Malaysia Shopping Malls Association have expressed concerns, urging for a gradual implementation to ease the financial burden on businesses. They propose a phased approach, starting at 4% in 2026 and increasing to 8% over a decade, to allow time for adjustment. NST Online
2. Reduction of SST on Construction Works
The SST rate on construction works has been reduced from 6% to 3%. This reduction aims to alleviate the financial strain on businesses, particularly in the retail sector, which frequently undergo refurbishments. The move is expected to support the retail industry’s preparations for initiatives like Visit Malaysia 2026. NST Online
3. Expansion of SST Coverage
The scope of SST has been expanded to include a wider range of goods and services. This expansion is designed to increase government revenue and reduce the fiscal deficit. However, it may lead to higher costs for consumers, particularly in sectors such as retail and services. The government has indicated that the implementation of the expanded SST will be gradual to minimize inflationary pressures. EY
These updates to the SST framework reflect Malaysia’s ongoing efforts to enhance fiscal sustainability while balancing the needs of businesses and consumers. Stakeholders are encouraged to stay informed about these changes and plan accordingly to mitigate potential impacts.