Renovation and Construction Services Now Subject to 6% SST

Updated: 12 January 2026

Effective from 1 July 2025, the Royal Malaysian Customs Department (RMCD) has officially brought renovation and construction work into the scope of Service Tax (SST) under the Service Tax Act 2018 and its subsidiary legislation - P.U. (A) 172/2025.

This marks a significant shift for contractors, project managers, and businesses involved in commercial and non-residential building works.

Previously, construction works were generally outside the SST regime. From 1July 2025 onwards, qualifying construction and renovations services under Group L are subject to a 6% Service Tax.

✅ What’s Now Taxable?

Under the Service Tax (Amendment) Regulations 2025 [P.U.(A) 172/2025], the scope of “construction works” includes:

“Construction, extension, installation, repair, renewal, removal, renovation, alteration, dismantling, demolition, or facility maintenance carried out during the construction period.”

This covers works relating to:

• Buildings and structures
• Roads, bridges, tunnels, pipelines
• Electrical, mechanical, water, gas, and telecommunication systems
• Any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel or reclamation works.

Construction work services are subject to 6% service tax where such services relate to commercial and other non-residential buildings.

Construction works carried out for residential buildings, together with public facilities related to those residential buildings, are excluded from the scope of service tax.

🔎 Real-World Scenarios & Case Studies

🏢 Scenario 1: Commercial Renovation of Office Premises

Scenario 1

ABC Sdn Bhd, a trading company, hires a renovation contractor to revamp their Klang Valley office, including installing glass partitions, new flooring, repainting, and rewiring. The contractor is Service Tax registered person under Group L, and the total project value is RM300,000.

✅ SST Treatment:

As the renovation works fall under "construction works", the contractor must charge 6% Service Tax on RM300,000. The total service tax amounts to RM18,000. ABC Sdn Bhd cannot claim SST input credit, so this becomes a cost to the business.

📌 Key Note: Service Tax registration is mandatory for the contractor if their total taxable services exceed RM 1,500,000 within any 12-month period, excluding construction work for residential buildings and public facilities related to those residential buildings.

🏠 Scenario 2: Residential Renovation for a Landlord

Scenario 2

Mr. Lim owns a residential property in Penang and engages a contractor to renovate his business rental apartment (kitchen, bathrooms, tiling, painting). The contractor’s annual taxable revenue exceeds RM 1,500,000 and he is a service tax registered person.

✅ SST Treatment:

The renovation services are not subject to service tax. Although the apartment is rented out for business purposes, it remains a residential building. In accordance with RMCD guidelines, renovation and interior design services for residential houses are excluded from the scope of service tax.

🧾 Who Needs to Register?

Contractors are required to register for Service Tax if their total value of taxable construction work services exceeds RM1,500,000 within any 12-month period, excluding construction works carried out for residential buildings and public facilities related to those residential buildings.

💡 Summary for Entrepreneurs

• ✅ Construction and renovation services are taxable at 6% Service Tax for commercial and non-residential projects
• 📅 Effective from 1 July 2025
• 💰 SST is a final cost — no input tax credit like GST
• 🔍 Check if your contractor is Service Tax Registered Person

⚠️ Need 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.