Excise Duty in Malaysia: Rates, Regulations, and Exemption

Governments worldwide impose excise tax to control the consumption of goods or services that could harm public health or the economy. This tax typically applies to products like tobacco, alcohol, fuel, and others. Malaysia also imposes excise duties on certain goods for similar reasons.

This blog aims to cover everything about excise duty in Malaysia, including excise duty exemption certificates and how to calculate excise duty.

Understanding Excise Duty Malaysia

Excise duty is a tax on specific goods imported or made in Malaysia for local use. It's used to influence consumer behavior by discouraging the consumption of harmful products like tobacco and alcohol.

In 2019, the government introduced a 40 sen excise duty on sweetened beverages, which increased to 50 sen per litre starting January 1, 2024. This was done to reduce the consumption of unhealthy products and focus on improving public health.

Authority: The Royal Malaysian Customs, under the Ministry of Finance, collects excise in Malaysia. They follow the regulations based on the Excise Act of 1976.

Tax Liability: The producers are the taxpayers for locally produced goods and the importers are the taxpayers of imported goods.

When is Excise Duty Levied?

There are two tax points in Malaysia. They are:

1. For locally produced goods, the excise tax is applied before the goods leave the factory or bonded warehouse. This is except for motor vehicles, where the tax is applied when the vehicle is registered with the Road Transport Department.
2. Applied to imported goods at the entry point into Malaysia.

Goods Subject to Excise Duty in Malaysia

• Beer
• Stout
• Cider
• Perry
• Rice wine
• Mead
• Un-denatured ethyl alcohol
• Brandy
• Whisky
• Rum
• Gin
• Tafia
• Cigarettes containing tobacco
• Motor vehicles and motorcycles
• Playing cards
• Mahjong tiles

Excise Duty Rates in Malaysia

The rates for each product and their types vary, making it confusing to calculate. The government charges taxes in 2 ways.

• Percentage of tax added on the existing value of the good
• Fixed sum added to the value of the good

Goods charged on a Percentage  basis

Goods are charged by adding a fixed sum to their value

Excise Duty Exemptions in Malaysia

The Malaysian government offers exemptions to certain products that promote healthier products in the country. They are summarised in the table below:

The Impact of Excise Duty on the Malaysian Economy

Since the introduction of excise duty in Malaysia, it has 

1. Improved public health by regulating the price of products like tobacco, alcohol, beer, sugary drinks, etc. In fact Malaysia has the second highest excise rate in the world on beer.
2. Become an essential revenue source for the government to fund public services and infrastructure.
3. Changed consumer behavior towards harmful products by increasing their prices. 
4. Supported local industries by making imported goods more expensive, encouraging people to buy locally.
5. While the tax helps generate income, it has also led to issues like smuggling and the growth of the black market for some goods.

Conclusion

Excise duty is great for Malaysia as it helps improve public health and its economy. In fact, it reduces health risks and eases the burden on the healthcare system. 

Although Malaysia, like many other countries, faces challenges with the black market due to excise duties, the tax still properly fulfills its purpose.