KUALA LUMPUR (June 27): Beauty services are now excluded from the expanded sales and service tax (SST), while the registration threshold for service tax on leasing or rental and financial services has been raised to RM1 million from RM500,000, according to the Ministry of Finance (MOF).

Additionally, the annual income threshold for businesses to be subject to service tax for rental services has been doubled to RM1 million, from RM500,000. This means that only businesses with annual sales exceeding RM1 million will be required to pay service tax on rental services, the MOF said in a statement on Friday (June 27).

This will provide relief to more micro, small and medium enterprises, it said in the statement on the revision to the expanded SST that will take effect on July 1. 

As for beauty services that are excluded from service tax, they include manicure, pedicure, facial, and those provided by barbers and hairdressers, it said.

Also exempted from the SST expansion are dates and mandarin oranges, the ministry said, on top of oranges and apples that were announced by Prime Minister Datuk Seri Anwar Ibrahim on Thursday. 

The revisions to the SST were made after carefully considering public and industry feedback that the government has been following closely since its announcement on June 9 regarding the rollout of the expanded SST, the MOF said. 

It reiterated that the government has not imposed sales tax on daily essential goods, whether locally produced or imported, including rice, chicken, beef, vegetables and eggs. 

"Local fish varieties, including selar, tongkol, cencaru and sardines, whether frozen, chilled or fresh, will also continue to be exempt from sales tax," it added.

The initial announcement on June 9 outlined the expansion of the sales tax, with a 5%-10% rate levied on selected, non-essential goods, while the service tax was broadened to include rental or leasing, construction, finance, private healthcare, education and beauty services at a rate of 6%-8%. The expansion, first announced in Budget 2025 last October, is aimed at broadening the country's tax base and increasing revenue to fund public services and assistance.

But the expanded SST was met with considerable pushback from both the public and industries. 

Many expressed concerns about its potential inflationary impact and the increased cost of doing business. Retailers and manufacturers have been particularly vocal, urging the government to reassess the scope and defer the implementation. Some have also complained about the lack of consultation on the service tax expansion.

Meanwhile, banks have collectively assured the public that basic banking services will not be affected by the 8% service tax on financial services. These include fees and commissions related to current accounts, savings accounts, e-wallets, cash deposits, withdrawals, payments, local fund transfers, and transactions at the branch and automated teller machines. 

Additionally, annual fees for credit or charge cards, and interest or profit, as well as penalties or other punitive charges, remain exempt.

The service tax for financial services will generally apply to fund management, investment and merchant banking-related services, and trade financing-related services, with a phased implementation. The first phase, starting July 1, will only apply to selected treasury, corporate, and investment banking services.