SST guide for construction services in Malaysia
Lu T.··4 min read
If you provide construction services in Malaysia, SST may apply to your projects.
Construction work services became subject to service tax from 1 July 2025, at a rate of 6%. However, not every construction project is taxable. The treatment depends on the type of project, your registration status and how the work is billed. Here are the key points to check.
Does SST apply to your construction business?
You generally need to register for service tax when the value of your taxable construction services exceeds RM1.5 million over a 12-month period. Construction work for residential buildings and related public facilities is not subject to service tax. While commercial and other taxable construction work can be subject to SST once the applicable requirements are met.
What is the SST rate for construction?
The service tax rate for construction work services is 6%. The important part is determining what value the 6% applies to.
What amount should you charge SST on?
This depends on how your contract and invoice are structured. If you separate construction services from goods or materials, the 6% SST applies to the construction service component. For example, a RM500,000 service component with RM300,000 in materials would incur RM30,000 SST. If the full RM800,000 is billed as a lump sum without separating the two, the entire amount may be subject to 6% SST, resulting in RM48,000 SST.
What about materials you purchase yourself?
The treatment depends on your contract. If your customer purchases the materials separately and your contract with the customer covers only your construction service fee, the service tax treatment is based on that service component.
If you provide both the materials and construction work under the same contract, the value included in your taxable construction service needs to be determined according to the contract and invoice structure.
What about subcontractors?
If you work as a subcontractor, the same construction service rules can apply to the services you provide. Your taxable service value should be considered against the applicable registration threshold. Construction services that are exempt from payment under specific arrangements can still be relevant when calculating the registration threshold.
When do you account for SST?
For construction services, service tax is generally accounted for when you receive payment for the taxable service. If Customs has approved you to use the invoice basis, the tax is accounted for when the invoice is issued instead. This matters for construction businesses because projects often involve progressive billing, retention sums and payments spread across different stages of the project.
How does SST affect your invoices?
If you are registered for SST and provide taxable construction services, you must issue an invoice for the construction work performed. Your invoice should clearly identify the taxable construction service and the applicable 6% service tax. For projects where materials and services have different SST treatment, keeping the components clearly separated can also make your tax calculation easier to support.
SST and e-invoice are different requirements
If your construction business is subject to both SST and e-Invoice, you need to manage both. SST is administered by Royal Malaysian Customs Department, while e-Invoice is administered by LHDN. Your accounting records therefore need to capture the transaction, SST and e-Invoice information accurately rather than treating them as the same requirement.
Managing construction invoices with Duitbooks
Construction projects can involve multiple invoices, progress payments, materials and tax calculations. Duitbooks keeps your invoices and accounting records together, allowing you to record the applicable SST while managing your e-Invoice workflow in the same system.
For each project, make sure you have confirmed:
Whether the construction work is taxable
Whether your business has crossed the RM1.5 million registration threshold
The applicable 6% service tax
Which part of the contract value is subject to SST
Whether materials and construction services should be separately stated
SST treatment can vary depending on your project and contract structure. Check the latest Customs guidance for your specific situation.