By KYN AI Advisory Team — AI implementation specialists, Singapore
Malaysia has no GST. It charges Sales and Service Tax (SST), a two-part tax that replaced GST in 2018. Sales tax is levied once, on taxable goods, at 5% or 10%. Service tax is levied on taxable services at 6% or 8%. A business registers when its taxable turnover passes a threshold, which is RM500,000 over a rolling 12 months for most cases. Unlike GST, SST has no input tax credit chain, so tax you pay on purchases is generally a cost, not a recoverable amount. Check each rate and threshold against the Royal Malaysian Customs Department (RMCD) before you set up invoicing.
What is the difference between SST and GST?
GST is charged at every stage of the supply chain, and each business recovers the GST it paid by claiming input tax. SST is charged at a single point.
| Point | GST (Singapore, a comparison) | SST (Malaysia) | |---|---|---| | Where tax applies | Each sale in the chain | Once, at manufacture or import (sales tax), or on a taxable service | | Input tax credit | Yes | Limited, with exemptions for some inputs | | Registration trigger | Turnover threshold | Taxable turnover threshold, by category | | Filing | Return with output and input tax | Return with tax charged |
For a Singapore company that sells into Malaysia, the practical consequence is that Malaysian customers do not expect a GST line. They expect SST only if you are a registered person providing a taxable service, or if you sell taxable goods you manufactured in Malaysia.
What does sales tax cover?
Sales tax is charged on taxable goods that are manufactured in Malaysia or imported. According to Grant Thornton's overview of the Malaysian indirect tax system, the rates are 10% for most taxable goods, 5% for a list of selected goods, and a specific rate for petroleum products.
Who is liable:
- Manufacturers of taxable goods who pass the registration threshold register and charge sales tax.
- Importers pay sales tax at customs clearance and do not need to register for that purpose.
- Traders who buy locally from a registered manufacturer pay sales tax in the price and do not charge it again.
For an SME that only trades goods bought from Malaysian suppliers, sales tax usually shows up as a cost inside the supplier's invoice, not as a line you charge.
What does service tax cover?
Service tax is charged by a person who provides a prescribed taxable service. The same Grant Thornton overview gives the rate as 8% for most taxable services and 6% for selected ones, as of its 1 January 2025 date. Grant Thornton Malaysia adds that digital services from foreign providers are charged at 8%, and that a business receiving imported taxable services must self-account for the tax.
That last point matters for SMEs with regional teams. If your Malaysian company pays a Singapore or Hong Kong entity for a taxable service, the Malaysian side may owe service tax on the import. Agree who accounts for it before the first invoice, not after.
The service tax base widened on 1 July 2025. KPMG's update lists new and expanded categories and says services such as financial, rental or leasing, construction, education and private healthcare were exempted by RMCD policies. It also reports a higher registration threshold of RM1 million for rental or leasing and for fee- or commission-based financial services. Read the current RMCD list for your service category, as scope has been changing.
When must an SME register?
Grant Thornton Malaysia states the thresholds over a rolling 12-month period:
- Sales tax: RM500,000 for manufacturers of taxable goods.
- Service tax: RM500,000 for most taxable services. Some categories have a nil, RM1,000,000 or RM1,500,000 threshold.
- Foreign digital service providers: RM500,000 to Malaysian consumers.
"Rolling" is the operative word. You do not wait for the calendar year to end. At the end of each month, add the last 12 months of taxable turnover for each category and compare it with the threshold.
A simple monitoring routine:
- Tag every invoice line with a tax category: sales-taxable, service-taxable, exempt, out of scope.
- Each month, sum the trailing 12 months by category.
- Raise a flag when any category passes 80% of its threshold.
- A named person reviews the flag and decides whether to register.
The 80% line is our working rule, not a regulatory one. It gives time to apply before the threshold is crossed.
What should an invoice show?
Once registered, the invoice shows the tax charged, the rate and your SST registration number. The e-invoice rollout adds structured data on top of this. See our timeline for Malaysia's MyInvois phases, because the same line-level tax data feeds both.
Data you need on each line:
- Item or service description and the tax category
- Taxable amount, rate and tax amount
- Exempt or out-of-scope reason where relevant
- Customer's SST or tax identification where required
If you keep one product list with a tax category on every item, both SST returns and e-invoices draw from it.
How should you quote a Malaysian customer?
State whether the price includes tax. A quote that says "RM10,000" and an invoice that says "RM10,000 plus 8%" create a dispute you could have avoided.
- Quote exclusive of SST when you are registered, and show the tax as its own line.
- Quote inclusive only when the customer asks, and show the tax-inclusive total with the rate.
- Keep the currency of the contract. If you quote in SGD and invoice in MYR, fix the exchange rate source and date in the contract. Our guide to recording foreign currency expenses covers the same discipline on the cost side.
- Record the tax category on the quote itself, so the invoice inherits it and nobody re-decides it at billing time.
A short checklist before the first invoice: registration number on file, category list agreed, rate table dated, and one person named to approve each SST return.
Where do SMEs make mistakes?
- Charging SST before registering. Only registered persons may charge it.
- Not registering after crossing the threshold. The trailing 12-month test catches this early.
- Ignoring imported services. Self-accounting applies to the Malaysian recipient.
- Using a stale category list. The July 2025 expansion changed scope. Review it at least yearly.
- Treating SST like GST in the ledger. With no input credit chain, purchase tax is a cost unless an exemption applies.
Where KYN fits
KYN builds finance systems in your own cloud account for SMEs in Singapore, Hong Kong, Indonesia and Malaysia. For tax categories, the pattern is a product list with the category on each item, a monthly job that sums trailing turnover by category, and a flag to a named person. Filings wait for a named person, and every action is logged with the actor.
For Malaysian tax invoicing, we spend the first 14 days on your product list, turnover and current invoice templates. The system that applies the right SST rules ships in under 90 days. See finance systems and integrations.
Frequently asked questions
Does Malaysia have GST in 2026?
No. SST replaced GST in 2018, as Grant Thornton Malaysia's overview notes. Sales tax and service tax apply to taxable goods and services above the registration threshold.
Do I charge Malaysian SST if I am a Singapore company?
Only if you are required to register. A foreign provider of digital services to Malaysian consumers registers above RM500,000, per Grant Thornton Malaysia. Other cases depend on the service category and where it is performed, so check with RMCD or an adviser.
What are the SST rates?
Sales tax is 5% or 10%, with a specific rate for petroleum products. Service tax is 6% or 8%. These are from Grant Thornton's overview dated 1 January 2025, so confirm them on the RMCD portal before use.
Checked 30 October 2026.
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