Customs Duty vs Import Duty vs Sales & Service Tax in Malaysia

Learn how customs duty, import duty and Sales & Service Tax work in Malaysia –how they are calculated, and where the three overlap.

Key takeaways

• Customs duty and import duty are the same tax in Malaysia. Both refer to the tariff charged on goods entering the country, calculated on the CIF (Cost, Insurance, Freight) value
• Sales and Service Tax (SST) is a separate domestic consumption tax. Sales Tax applies to goods manufactured in Malaysia and imported goods at the point of customs clearance, while Service Tax applies to prescribed services
• Sales Tax rates in Malaysia are typically 5% or 10%, depending on the goods classification under the Harmonised System (HS) code
• Low-value goods (LVG) sold online at RM500 or less carry a flat 10% sales tax collected at the point of sale by the seller, not at the border
• Schedule A, B and C exemptions can reduce or eliminate SST for eligible goods, persons or manufacturers importing raw materials

For Malaysian businesses importing goods, the tax structure at the border can be confusing. Customs duty, import duty, Sales Tax, Service Tax and excise duty all appear in the same conversation, and the terminology often overlaps in ways that make it hard to work out what actually gets charged and when.

This guide breaks down the three main taxes that affect imports into Malaysia: customs duty, import duty (which is the same thing, despite the different name) and Sales & Service Tax. Each section covers what the tax is, how it’s calculated, and where the exemptions sit.

What is customs duty in Malaysia?

Customs duty is the tariff Malaysia charges on goods crossing the border, either into the country (imports) or out (exports). It’s collected by the Royal Malaysian Customs Department (RMCD) at the point of clearance and applies before the goods enter the domestic market.

Customs duty serves several purposes. It generates government revenue, regulates the flow of certain goods across borders, protects specific domestic industries from foreign competition, and enforces compliance with international trade agreements.

The rate depends on two factors: how the goods are classified under Malaysia’s Harmonised System (HS) code, and whether the country of origin has a Free Trade Agreement (FTA) with Malaysia. Rates typically range from 0% to 60% on an ad valorem basis (a percentage of the goods’ value), or on a specific basis (a fixed amount per unit, common for tobacco, alcohol and fuel).

For exports, Malaysia generally doesn’t impose duties. The exception is a small number of commodities like palm oil, timber and certain minerals, which carry export duties to manage resource outflow and support domestic supply.

What is import duty in Malaysia?

In Malaysia, import duty and customs duty refer to the same tax. Both terms describe the tariff charged on goods entering the country at the point of customs clearance.

The reason both names appear in official documentation and everyday business language is that “customs duty” is the broader legal term used under the Customs Act 1967, while “import duty” is the common working term used by importers, forwarders and payment platforms. Functionally, they’re the same charge.

Import duty is calculated on the CIF value of the goods:

CIF Value = Cost of goods + Insurance + Freight

What is Sales & Service Tax (SST) in Malaysia?

Sales & Service Tax (SST) is Malaysia’s consumption tax system, reintroduced on 1 September 2018 when it replaced the Goods and Services Tax (GST). Unlike GST, SST is a single-stage tax with no input tax credit mechanism, so tax paid on inputs cannot be offset against tax collected on outputs.

SST has two distinct components.

Sales Tax applies to taxable goods manufactured in Malaysia and to taxable goods imported into the country. For imports, it’s collected at the point of customs clearance alongside import duty. The calculation compounds:

Assessable Value for Sales Tax = CIF Value + Import Duty

Sales Tax = Assessable Value × Sales Tax Rate

• Sales Tax rates are typically 10% (the default for most manufactured goods) or 5% (for essential goods, selected food items and certain building materials). Specific rates apply to petroleum products, and 0% applies to goods for export. Schedule A exempts basic categories entirely, including basic food staples like rice, flour and sugar, medicines, medical devices, printed materials and standard bicycles.
• Service Tax applies to prescribed taxable services provided by registered service providers. The standard rate is 8%, with 6% applying to specific categories including logistics services (freight forwarding, warehousing, customs agent services, courier services and haulage) and, since January 2026, rental and leasing services including industrial premises.

For low-value goods (LVG) sold online at RM500 or below, a flat 10% Sales Tax applies. This is collected at the point of sale by the registered online seller through the MyLVG portal, not at the border.

Manufacturers with an annual turnover exceeding RM500,000 must register for Sales Tax through the MySST portal. Schedule C exemptions are available for registered manufacturers importing raw materials, components, packaging materials, machinery and equipment used directly in manufacturing, provided the exemption is approved before the goods arrive at the border.

Customs Duty vs Import Duty vs Sales & Service Tax in Malaysia

Here’s how the three taxes compare side by side:

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FAQs

1. What is the difference between customs duty and import duty in Malaysia?

In Malaysia, customs duty and import duty are the same tax. “Customs duty” is the broader legal term used under the Customs Act 1967, while “import duty” is the everyday working term used by importers and forwarders. Both refer to the tariff charged on goods entering Malaysia at the point of customs clearance.

2. How is Malaysia import duty calculated?

Malaysia uses the CIF (Cost, Insurance, Freight) method to calculate import duty. The CIF value is the cost of the goods plus insurance plus freight to the Malaysian port of entry. The applicable duty rate (based on the HS code and any Free Trade Agreement preference) is applied to this CIF value.

3. What is the low value goods (LVG) tax in Malaysia?

Since 1 January 2024, imported goods sold online at RM500 or below carry a flat 10% Sales Tax. This LVG tax is collected at the point of sale by the registered online seller through the MyLVG portal, not at the border by customs. Cigarettes, tobacco, alcohol and smoking pipes are excluded and keep their existing duty and tax treatment.

This article is intended for informational purposes only and does not constitute legal advice or professional advice. This article should not be regarded as constituting an offer or a solicitation to buy or sell any regulated or financial products or services. WorldFirst makes no representations or warranties regarding the accuracy, completeness, or applicability of the content, and readers are encouraged to consult with legal professionals or other professionals for advice tailored to their specific situation. WorldFirst does not guarantee the accuracy and completeness of this article and expressly disclaims any and all liability to any person in respect of the consequences of anything done or omitted to be done wholly or partly in reliance on this article.