Sales Tax on Low Value Goods (LVG)

The Sales Tax (Amendment) Bill 2022 and Service Tax (Amendment) Bill 2022 were tabled for first reading in the Parliament of Malaysia on 1 August 2022.

Of notable mention is the proposed legislation of the Sales Tax on LVG, which was proposed in the Budget 2022. A new Schedule has been introduced to specify the modifications to the provisions of the Sales Tax Act 2018 which apply to LVG. Set out below are the salient points from the proposed Bill:

Effective Date

To be gazetted (it was earlier proposed to be effective 1 January 2023)

Low Value Goods (LVG)

Means any prescribed goods or class of goods outside Malaysia which are sold at a price not more than a prescribed amount and brought into Malaysia in the manner as prescribed


Means a person, whether in or outside Malaysia, who sells LVG on an online marketplace or operates an online marketplace for the sales and purchase of LVG

Taxable Person

Means a registered seller or a seller who is liable to be registered under section 12

Imposition and scope of LVG

Sales Tax to be charged on LVG sold by a taxable person. The Minister of Finance may determine the LVG based on the following criteria:

  1. Goods or class of goods
  2. The price of goods; and
  3. The manner in which the goods are brought into Malaysia


To be gazetted

Value of LVG subject to Sales Tax

Price of LVG not including any tax, fee or other charges imposed on the LVG

Registration Threshold

To be gazetted, based on 12-months period

Sales Tax Due

At the time when the LVG are sold by the taxable person

Taxable Period

Every 3 months

Furnishing of Returns

Last day of the month following the end of taxable period


Invoice or any documents containing prescribed particulars (to be released)

Display of Information on Package

Every registered seller shall furnish to the Director General prescribed particulars which shall be displayed on the package of LVG in the matter as may be prescribed

Customs Control

Where it appears that the Sales Tax on LVG has not been charged, has been charged at a lower rate or has not been paid, the LVG cannot be released from Customs control until the Sales Tax has been paid in full.

Transitional Provisions

Goods purchased before the effective date but delivered to Malaysia after the effective date is not subject to Sales Tax

Under the proposed Sales Tax on LVG, online Sellers would need to register for Sales Tax and charge Sales Tax on goods brought into Malaysia. The prescribed details e.g. threshold, rate, invoice/ documents and Returns, have yet to be released.

Based on the proposed Bill, a few key issues to take note of are:

-        The Minister may determine the goods or class of goods for LVG. Currently, Sales Tax on taxable goods is determined based on the 10-digit HS code.

-        The proposed Value of LVG subject to Sales Tax is different from the current Sales Tax value of imported taxable goods which is based on the sum of Customs value (i.e. cost, insurance, freight and duties).

-        The Minister may determine the price of goods and manner in which the goods are brought into Malaysia. It was earlier proposed that the Sales Tax on LVG would apply to goods imported into Malaysia via air courier with value of RM500 or less. This suggests that goods with value above RM500 or not imported via air courier will be subject to Sales Tax upon importation as usual.

-        Sellers who sell LVG on an online marketplace or operate an online marketplace for the sales and purchase of LVG need to register for Sales Tax on LVG. This would suggest that direct sellers who do not use online marketplace to sell their goods would not be liable to register for Sales Tax and such goods will be subject to Sales Tax upon importation as usual.

The proposed Sales Tax on LVG would effectively expand the goods subject to Sales Tax [as currently such taxable goods are exempted under item 24, Schedule A of the Sales Tax (Persons Exempted from Payment of Tax) Order 2018]. Whilst it seems to be an expansion of the Sales Tax regime, the characteristics of Sales Tax on LVG are rather different, as highlighted above.  The far reaching impacts include complexities where the same goods will be subject to Sales Tax under two systems i.e. Sales Tax on LVG if sold via an online marketplace or normal Sales Tax upon importation for direct sales. 

In addition, although the complexities of determining the tariff code is eliminated with a proposed goods or class of goods and fixed rate, on the flip side, would it also mean that Sales Tax on LVG covers goods which otherwise are prescribed to be exempted from Sales Tax (based on the 10-digit HS code)? Where the LVG is sold by a Seller who does not meet the threshold to register, how would Sales Tax be collected? In the case of goods returns, how will the Sales Tax be refunded?

Sellers using online marketplace as well as operators of online marketplace should keep a close eye for further developments on this matter. Ongoing engagements with the Authorities are encouraged to ensure they are ready once the effective date is announced including the system configuration to charge and report Sales Tax, pricing of products, communication with customers and etc.

Please click on the above header link for copies of the Indirect Tax Bills 2022 at the official portal of Parliament of Malaysia for further details.

Our highlights are intended to provide a general overview of the key proposed tax changes and should not be used or relied upon as a substitute for detailed advice or as a basis for formulating business decisions.

For customized guidance, please do not hesitate to reach out to your trusted KPMG adviser(s),

Petaling Jaya Office

Soh Lian Seng
Executive Director -
Head of Tax and Head of Tax Dispute Resolution
+ 603 7721 7019

Bob Kee
Executive Director -
Head of Transfer Pricing
+ 603 7721 7029

Tai Lai Kok
Executive Director -
Head of Corporate Tax
+ 603 7721 7020

Long Yen Ping
Executive Director -
Head of Global Mobility Services
+ 603 7721 7018

Ng Sue Lynn
Executive Director -
Head of Indirect Tax
+ 603 7721 7271

Outstation Offices

Penang Office

Evelyn Lee
Executive Director -
Penang Tax
+604 238 2288 (ext. 312)

Ipoh Office

Crystal Chuah Yoke Chin
Associate Director -
Ipoh Tax
+605 253 1188 (ext. 320)

Kuching & Miri Office

Regina Lau
Executive Director -
Kuching & Miri Tax
+6082 268 308 (ext. 2188)

Kota Kinabalu Office

Titus Tseu
Executive Director -
Kota Kinabalu Tax
+6088 363 020 (ext. 2822)

Johor Bahru Office

Ng Fie Lih
Executive Director -
Johor Bahru Tax
+607 266 2213 (ext. 2514)