Latest Changes in SST from Group A to Group M:
What Malaysian Entrepreneurs Need to Know

Updated: 4 July 2025

Malaysia’s government has recently implemented sweeping changes to its Service Tax framework, a move that expands the tax base and alters how businesses across various sectors charge SST (Sales and Service Tax). Effective 1 July 2025, the amendments are part of a broader tax reform initiative aimed at increasing fiscal resilience and ensuring equitable contributions across growing service industries.

These changes - codified under PU(A) 172/2025 - have significant implications for both registered and previously non-registered businesses. Below, we break down the changes in a simple “Before vs After” format, so Malaysian entrepreneurs can easily understand what’s new and how to prepare.

1. SST Rate Changes

Before:

• Standard SST rate for taxable services was 8% for all taxable service categories, except for food and beverage, telecommunications services, car parking space services and logistics services.

After:

• 8% rate applies to the following new taxable services arising from expansion of Service Tax Scope such as leasing or rental, financial services.
• The 6% rate remains for essentials like food and beverage, telecommunications services, car parking space service, and logistics service and also covering newly introduced taxable services such as construction, education and private healthcare services.
• Bundled services - If the providers registered under Group A to E also offer other taxable services (e.g. food & beverage), they have to charge a different SST rate, either in 6% or 8% on respective taxable service offered.

📝 Action: Ensure your invoicing and point-of-sale systems can separate services by rate category.

2. Changes in Group A: Accommodation Services

Before:

• SST applied to accommodation providers such as hotels, service apartment, homestay, inns and similar establishments.
• If these providers also offer other taxable services (e.g. food & beverage), they have to charge a different SST rate, either in 6% or 8% on respective taxable service offered.

After (From 1 July 2025):

• Accommodation providers must now charge service tax on other newly added taxable services offered within their premises (e.g. earning rental from equipment), even if not separately registered under other groups.
• Exception: Services relate to private healthcare service (e.g. hospital stay), service tax under Group A is not applicable.

📝 Action: Hotels and resorts must stay fully informed on the latest changes related to Service Tax Expansion and ensure the correct service tax rates are applied to their offerings when issuing invoices to guests.

3. Changes in Group B: Food & Beverage (F&B) Services

Before:

• F&B businesses such as restaurants, cafés, and caterers charged SST on provision of prepared or served foods and beverages.
• Rental income from stalls (e.g stall space to food stall operator) was not taxable.

After:

• Rental income within the premises (e.g. stall space to food stall operator) is now subject to SST.
• Group B providers must also charge SST for other taxable services they provide - except service offered by private healthcare service operator/service provider.

📝 Action: Registered F&B operators who lease stall space is required to charge service tax on leasing of stall space with effective from 1 July 2025 regardless the rental income earning from stall space leasing exceeds RM 1,000,000 within a period of 12 months or less.

4. Group C: Night-Club, Dance Halls, Cabarets, Karaoke Centre, wellness centres, massage parlours, public houses and beer house

Before:

• Group C applied to spas, massage parlours, health and wellness centres, karaoke centres, and nightclubs.
• If these providers also offer other taxable services (e.g. food & beverage), they have to charge different SST rate, either in 6% or 8% on the respective taxable service offered.

After:

• Health and wellness have been replaced with wellness centre.
• The definition of “Wellness Centre” is now provided which:
  • Includes beauty treatment service offered by beauty centres, which consist of body hydrotherapy, facial services, tattoo parlours, slimming, postnatal centres, hairdressing, and aromatherapy.
  • However, based on the recent media release issued by the Ministry of Finance dated 27 June 2025 ,beauty service (eg: manicure and pedicure; facial services; barbers and hairdressers) is no longer subject as taxable service. Therefore these services is not subject to service tax.

📝 Action: Non-registered wellness, and massage businesses is liable to register for SST if their value of taxable service is expected to exceed RM 500,000 within a period of 12 months or less in the month August 2025 and start charging the 8% SST with effective from 1 September 2025.

5. Group D: Private Clubs

Before:

• Private clubs charging membership fees that cover service offerings or operating restaurants within the club were subject to SST on services provided to members.
• Private clubs must charge SST on any service offered within the private club and any other taxable service offered in other Groups (e.g. event hosting, rentals, packages).

After:

• Private clubs must charge SST on any service offered within the private club and any other taxable service offered in other Group (e.g. event hosting, rentals, packages).
• Exception: Services relate to private healthcare service, service tax under Group D is not applicable

📝 Action: Private clubs must stay fully informed on the latest changes related to Service Tax Expansion and ensure the correct service tax rates are applied to their offerings when issuing invoices to its members and guests.

6. Group E: Golf Clubs & Driving Ranges

Before:

• SST applied to season pass, caddy services, coaching services or services related to golf provided by the golf clubs, other taxable services specified in other Groups as well as any other service within the golf club or golf driving range.

After:

• With the inclusion of leasing or rental services as taxable services, golf clubs or golf driving ranges are now required to charge SST on the rental of properties that are located separately from the golf club premises.

📝 Action: Golf clubs need to identify and classify every revenue stream for SST purposes.

7. Group F: (No significant amendments disclosed)

📝 Note: Group F was not the focus of recent changes and remains primarily related to betting and gaming taxable services.

8. Group G: Professional and Consultancy Services

Before:

• Included legal, accounting, engineering, architecture, and consultancy services.

After:

• Several exclusions and reclassifications:
  • Financial consultancy, financial management, and financial digital services which relating to financial services are now under Group H (Finance).
  • Facility maintenance and management during the construction period is now under Group L (Construction).

📝 Action: Professionals under Group G must take in all prescribed taxable services under Group G when computing the threshold value of Group G, whether has exceed/expected to exceed RM 500,000 within a period of 12 months or less and to register for SST under Group G if applicable

9. Group H: Financial Services (Previously Only Credit/Charge Cards)

Before:

• Only credit card annual fees (RM 25) were subject to SST.

After:

• Now includes:
  • Individual insurance (except personal medical/life/family takaful)
  • Financial leasing and lending services
  • Financial advisory and brokerage
  • Digital financial
• Effective date for non-listed services: 1 September 2025.
• Charges for outward remittance which imposed on customer located in Malaysia is now taxable.

Threshold: RM 1,000,000 within a period of 12 months or less.

📝 Action: Banks, insurers, e-wallets, and fintech companies must update fee structures and prepare for SST audits.

10. Group I: Other service provider

Before:

• Healthcare services are not regarded as taxable services

After:

• SST now applies to:
  • Private healthcare facilities (e.g. private clinics/hospitals) if revenue > RM 1,500,000
  • Traditional and complementary medicine (TCM)
  • Allied health services (e.g. physiotherapy, speech therapy)

Note: SST is only chargeable to non-citizens.

📝 Action: Private clinics who has earnings more than RM 1,500,000 for current month+next 11 months (12-month projection) period must register for SST, regardless the health care service provided to citizen and non-citizen.

11. Group J: (No major updates disclosed)

📝 Note: Group J was not the focus of recent changes and remains primarily related to logistics service, courier or transport services.

12. Group K: Rental or Leasing Services

Before:

• SST applied only to specific person who are granted license by Public Transport Act for Penisular Malaysia as well as Commercial Vehicles Licensing Board Act 1987 for East Malaysia which are under Group I.

After:

• Now applies to rental or leasing of any tangible asset (excluding housing accommodation and financial lease), including but not limited to:
  • Commercial property
  • Machinery
  • Plants and animals

Threshold: RM 1,000,000 within a period of 12 months or less.

📝 Action: Landlords renting out commercial units must charge 8% SST once threshold is met. Exceptions include residential rentals and finance leases.

13. Group L: Construction Services

Before:

• Construction services were never a taxable service.

After:

• All construction services are now taxable except:
  • Residential buildings
  • Public facilities approved by the local authorities solely as residential buildings (e.g. playground)
• Mixed developments are fully taxable (e.g. shoplots + serviced apartments).

Threshold: RM 1,500,000/year.

📝 Action: Construction service provider who has earnings more than RM 1,500,000 inclusive of value of all taxable construction work and materials, for current month+next 11 months (12-month projection) period must register for SST.

14. Group M: Education Services

Before:

• Most education services were SST-exempt.

After:

• SST applies if:
  • Private playschools/private preschool until private secondary school as well as tuition centres, international schools, etc which impose fees exceed RM 60,000 per student/academic year.
  • Private colleges/universities and language centres charge non-Malaysians.

📝 Action: International schools must assess whether if there is any fees exceed RM 60,000 per student/academic year and if there is any, the international school need to apply registration in August 2025.

Summary of Group-Based SST Changes

How YYC Can Help

YYC’s tax professionals are ready to guide your business through this SST expansion with:

• ✅ SST Registration & Readiness Review
• ✅ SST Classification of Goods & Services, & B2B exemption/ intragroup relief
• ✅ Custom ruling / Sales tax exemption application
• ✅ Internal SST Training for Finance Team
• ✅ Ongoing SST Compliance Consultation

Book a consultation with YYC today and ensure your business is 100% SST-ready.