Excise tax

Excise tax is a duty on goods like alcohol, tobacco and sugary drinks made in or imported into Malaysia.

March 2024 | Published by Xero

Published Wednesday 30 September 2026

Table of contents

Key takeaways

  • Excise tax, officially called excise duty in Malaysia, applies to specific goods such as alcohol, tobacco, sugary drinks and motor vehicles
  • The licensed manufacturer pays it when goods leave its premises, and importers pay it when goods enter Malaysia
  • Duty is either a fixed amount per unit or a percentage of the goods' value, depending on the product
  • Rates rise through the national Budget, so review your costs and prices each time new rates are announced

What is excise tax?

Excise tax is a tax on specific goods made in or imported into Malaysia, such as alcohol, tobacco and sugary drinks. Malaysia officially calls it excise duty, and the two terms mean the same thing.

Excise duty is charged under the Excise Act 1976 on goods listed in the Excise Duties Order 2022. The Royal Malaysian Customs Department (RMCD) collects it from licensed manufacturers and importers.

Picture a Selangor craft brewery: every batch leaving its licensed premises carries duty, whether it goes to a local bar or a Penang shop. The brewery pays the duty first, then recovers it through the price of each can.

Goods subject to excise duty in Malaysia

Six categories of goods currently attract excise duty in Malaysia. You'll pay it directly if you make or import any of them:

  • Sugar-sweetened beverages (SSB) that exceed set sugar limits
  • Motor vehicles, including certain cars and motorcycles
  • Alcoholic drinks, such as beer and spirits
  • Cigarettes and other tobacco products, including cigars
  • Mahjong tiles
  • Playing cards

The list goes beyond alcohol and tobacco. A games importer bringing in mahjong sets needs to plan for duty just like a brewery does.

Types of excise duty

Malaysia sets excise duty in two ways. Which one applies depends on the goods you make or import.

Specific excise duty

Specific duty is a fixed ringgit amount per unit, such as per litre, per stick or per litre of pure alcohol. It stays the same whatever the selling price, so a premium soft drink and a budget one pay the same duty per litre.

Ad valorem excise duty

Ad valorem means "according to value", so this duty is a percentage of what the goods are worth. Motor vehicles are the main example, with rates of 10%–105% depending on vehicle type and engine capacity. A pricier car pays more duty because the percentage applies to a larger value.

How to calculate excise duty

Your calculation depends on whether your goods carry specific or ad valorem duty. For alcohol, RMCD's alcohol duty formula multiplies volume by alcohol strength and the rate.

  1. Check that your product is dutiable and find its tariff code, which sets the rate that applies
  2. Note the unit the rate uses, such as litres, sticks, kilograms or litres of pure alcohol
  3. Measure your quantity from production records or, if you import, your commercial invoice
  4. Multiply the quantity by the rate, or multiply the value by the percentage for ad valorem goods

Say your brewery releases 1,000 cans of 320 ml beer at 5% alcohol, which is 320 litres in total. At the beer rate of RM192.50 per litre of pure alcohol, the duty is 320 × 5% × RM192.50 = RM3,080. That works out to RM3.08 a can, before you add your margin.

Excise duty rates in Malaysia for 2026

The rates below reflect Budget 2026 and the latest confirmed updates for sugary drinks and cars. Each one changes what you pay per unit, so check the goods you handle.

Rates can move with each Budget. Check RMCD's latest figures before you set prices or sign supply contracts.

Who pays excise duty?

The business that makes or imports dutiable goods pays excise duty, and the cost then flows to buyers through the price. Under the Excise Act 1976, a licensed manufacturer pays when goods leave its licensed premises, and an importer pays when goods are imported.

Retailers and food and beverage businesses pay it indirectly, since it's already built into their supplier prices. If you run a bar, every carton of beer you buy includes the brewer's duty.

Excise duty vs sales tax

Malaysia's consumption tax is sales and service tax (SST), and excise duty sits alongside it for a short list of goods. Here's how excise duty compares with the sales tax side of SST:

Many excise businesses handle both taxes, so give each one its own account. That habit is part of sound business accounting and keeps your SST obligations easy to track.

Why excise duty matters to small businesses

Excise duty is a direct cost you pay before you make a sale, so it shapes both your prices and your cash. If you make or import dutiable goods, build the duty into your pricing strategy so your margin holds when rates rise.

Duty falls due when goods leave your premises or arrive in Malaysia, often weeks before your customer pays you. Adding these payments to your cash flow forecast shows when you'll need the money.

Clear records make the rest easier. With accounting software, you can track duty as its own cost and see how each rate change affects your gross profit.

Keep excise costs in check with Xero

Excise duty is easier to manage when you can see exactly what it costs you. Xero lets you record duty in its own expense account and watch its effect on margins in real-time reports.

Planning for rate changes before they land keeps your prices and cash on track. Sign up today and get one month free to start tracking your excise costs with confidence.

FAQs on excise tax

Here are quick answers to common questions about excise tax in Malaysia.

Why is alcohol so expensive in Malaysia?

Malaysia taxes alcohol on its pure alcohol content, so a strong spirit carries far more duty per bottle than a light beer. That duty is paid before the drink reaches the shelf, and each business along the chain adds its margin on top.

How does excise duty work in Labuan and Langkawi?

The Excise Act 1976 has separate rules for both islands: goods made there count as made outside Malaysia, and goods moved there from the rest of the country count as exports. Check with RMCD how duty applies before you ship dutiable goods to either island.

Do I need a licence to make dutiable goods?

Yes, section 20 of the Excise Act 1976 requires a manufacturing licence, and section 25 covers a warehouse licence for storing goods before duty is paid. Get your licence in place before production starts, since it covers the premises where you make the goods.

Is sales tax charged on top of excise duty?

For imported taxable goods, yes. Under section 9 of the Sales Tax Act 2018, sales tax on imports is based on the customs value plus customs and excise duty. In practice, you pay sales tax on the duty too.

When could excise rates change next?

The government is due to table Budget 2027 on 9 October 2026, and excise changes are usually announced in the Budget. Check the new rates before you set your 2027 prices.

Related terms

Learn more about excise tax

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Disclaimer

This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.