Malaysia is increasing its focus on indirect taxes as part of broader efforts to strengthen tax governance and revenue collection. Since the Sales and Service Tax (SST) replaced the former Goods and Services Tax (GST), businesses have had to manage indirect tax as a single-stage tax with limited recovery mechanisms, making it a direct cost in many cases. The scope of SST was expanded from 1 July 2025 to include new categories of services such as leasing, construction, financial services, private healthcare and education, alongside changes to the sales tax rate structure.

Service tax applies only to prescribed taxable services, while sales tax applies to selected goods manufactured locally or imported into Malaysia, and the boundaries between what is and is not taxable continue to shift. As a result, correct classification of goods and services, registration assessment, and accurate reporting have become critical to managing exposure and avoiding underpayment risks. 

With ongoing changes to scope, exemptions, and enforcement focus by the Royal Malaysian Customs Department (RMCD), businesses face increased compliance complexity. Errors in classification, registration, or documentation can lead to assessments, penalties, and disputes. Proactive indirect tax compliance and advisory support is therefore essential to manage risk, control costs, and maintain operational certainty.

What Is Indirect Tax In Malaysia

Indirect tax is generally imposed on the sale or supply of goods and services, with the tax collected by businesses and paid to the government. In Malaysia, the main indirect taxes include sales tax and service tax under the SST regime, while customs duties may also apply to certain imported goods.

Understanding the applicable tax treatment, including classification, registration and reporting requirements, is important to help businesses manage their indirect tax obligations effectively.
 

Sales Tax and Service Tax

Classifying taxable goods and services is not always straightforward. Businesses must manage their exposure to Sales Tax and Service Tax (SST) carefully to ensure correct registration, reporting, and treatment of transactions, particularly during RMCD audits and reviews.

Our services include:

• Registration for sales tax and/or service tax
• Review of sales tax and service tax returns
• Health checks
• Retainer services
• Advisory services pertaining to sales and goods and services tax implications for business activities and/or specific transactions
• Managing customs audits
• Managing customs ruling applications

 

Customs Duties

Businesses can incur significant compliance and administrative costs when dealing with the Royal Malaysian Customs Department (RMCD) for import and export declarations. Correct transaction structuring, including classification, valuation, and duty treatment, helps reduce cost leakage and mitigate audit and penalty risks.

Our services include:

• Applications for indirect tax exemption and refund, tariff classification and trade facilitation arrangements
• Reviewing of agreements, transactions, voluntary declarations, etc.
• Customs valuation and transfer pricing reviews
• Managing customs audits and investigations
• Making representations to RMCD for rulings and dispute resolutions

Speak to BDO Today

Our Indirect Tax team works closely with businesses to manage Sales Tax, Service Tax, and customs compliance effectively while addressing potential risks and exposures. Speak to us to understand how we can support your indirect tax compliance and advisory needs today.