Latest SST Updates – Key Changes Effective January 2026
The Malaysian Government announced several important revisions to the Sales and Service Tax (SST) framework on 5 January 2026. These updates, which take effect from 1 January 2026, are aimed at easing business costs, supporting MSMEs, and ensuring continuity for key economic sectors.
Below are a summary of the main changes and their implications for businesses.
1. Rental and Leasing Services
As part of the revised SST measures, the service tax rate imposed on rental and leasing services has been reduced from 8% to 6%, effective 1 January 2026.
In addition, the Ministry of Finance has increased the annual sales threshold for service tax exemption applicable to micro, small and medium enterprises (MSMEs). Businesses with annual taxable sales of up to RM1.5 million will now be exempt, compared to the previous threshold of RM1 million.
2. Construction Services
The Government has also announced an extension of the service tax exemption for construction services. Construction contracts that were signed before 1 July 2025 will now enjoy exemption until 30 June 2027, representing a one-year extension.
For qualifying contracts that do not contain reviewable clauses, this effectively allows for up to two years of service tax exemption.
Separately, the construction of religious buildings — including suraus, mosques, temples, churches, and shrines — continues to be fully exempt from service tax, in line with the policy implemented since 1 July 2025.
Sales Tax Updates
Under the updated SST framework, zero-rated sales tax continues to apply to essential raw materials and agricultural inputs used by registered manufacturers.
The exemption includes:
– Animal feed
– Fertilisers
– Pesticides
These measures are intended to support the agriculture and manufacturing sectors by keeping production costs manageable and safeguarding supply chains.
How we can help:
We offer a comprehensive range of services to help you navigate evolving SST regulations:
– SST Advisory
– SST Compliance