(TAX UPDATE) Malaysia’s Consolidated E-Invoice: Why Certain Industries Cannot Use It

(TAX UPDATE) Malaysia’s Consolidated E-Invoice: Why Certain Industries Cannot Use It

Introduction

Malaysia’s national e-invoicing rollout is no longer a future concept. It is now a firm reality for all businesses. As IRBM gradually tightens the rules under Budget 2026, many SME owners begin to realise that the shift is more than just “sending invoices electronically”.

The system brings a new level of transparency, real-time reporting, and digital audit trails across the economy.

One important feature inside this framework is the consolidated e-invoice, designed to help businesses that deal with thousands of small B2C transactions every month. Consolidation reduces system load, lowers administrative work, and cuts down repetitive submissions.

However, IRBM does not allow every business to use consolidated invoices.

Certain industries and transaction types must issue individual e-invoices, even if the volume is high. These exclusions are not random as they follow a strong risk-based and tax-governance reasoning.

This KTP newsletter summarises the updated rules (up to September 2025), explains the reasons behind the exclusions, and highlights what SME owners and accountants must prepare for before full enforcement in 2026.

Key Summary

1. What is a Consolidated E-Invoice?

A consolidated e-invoice allows a business to group multiple small-value, walk-in B2C sales into a single monthly invoice. The consolidated invoice must be issued and submitted within 7 calendar days after month-end.

2. Industries Not Allowed to Use Consolidation

IRBM’s Specific Guideline (Version 4.4) lists the following industries where individual e-invoicing is compulsory:

  • Motor vehicle sales (automotive sector)

  • Flight tickets & private charter flights

  • Construction contracts

  • Wholesale/retail of construction materials

  • Betting & gaming payouts

  • Payments to agents, dealers, and distributors

  • Luxury goods and jewellery

3. New Exclusions Starting 1 January 2026

  • Electricity services (billing by Tenaga)

  • Telecommunications services (postpaid plans, fibre, device bundles)

  • Any single transaction exceeding RM10,000, regardless of industry

4. Grace Period Is Ending

Businesses enjoyed temporary 6 months relaxation, but enforcement will now follow Section 120 ITA 1967 penalties.

Why the Restrictions Exist ?

IRBM’s decision to restrict consolidated e-invoicing is based on four strategic reasons, all linked to transparency, risk management, and national revenue protection.

1. High-Value Transactions Require Real-Time Monitoring

Industries involving high-value goods such as cars, flights, construction projects, and expensive materials are not suitable for consolidation. A single car, for example, may cost RM80,000. A construction contract may run into millions. A single jewellery purchase may exceed RM50,000.

For such industries, IRBM requires:

  • Transaction-by-transaction visibility

  • Tax Identifier Numbers (TIN) for every sale

  • Real-time validation through MyInvois

This prevents businesses from issuing one big monthly consolidation to “mask” significant sales.

In simple terms, IRBM wants to see the big tickets clearly, not buried inside a monthly summary.

2. High-Risk Sectors Linked to Tax Evasion

Research shows that some industries historically contribute to Malaysia’s tax leakage problem. Examples include:

  • Construction (complex supply chain, multiple subcontractors, informal traders)

  • Automotive (undervaluation and underreporting risks)

  • Betting & gaming (cash-driven payouts)

  • Luxury goods (high potential for smuggling or underreporting)

Malaysia’s shadow economy is estimated at billion ringgit. Such leakages directly impact national revenue.

By forcing individual e-invoices, IRBM strengthens:

  • traceability

  • tax reporting accuracy

  • integrity of supply-chain records

For these industries, consolidation is seen as too risky because it reduces transparency.

3. Preventing Tax Avoidance and Invoice Manipulation

Without restrictions, businesses might misuse consolidation by:

  • hiding high-value sales

  • merging unrelated transactions

  • delaying recognition of income

  • smoothing revenue figures across months

  • manipulating commission payments

For example:
A company that sells 20 machines worth RM30,000 each could theoretically combine them into one consolidation invoice and delay validation until month-end and reduce real-time detection of revenue spikes.

The RM10,000 threshold introduced for 2026 shows IRBM’s clear intention to shut down such practices.

4. Strengthening Audit Trails and Corporate Governance

Malaysia is moving toward a digital tax environment aligned with OECD and global standards. Under this direction, IRBM wants every high-value or high-risk transaction to contain:

  • a QR code

  • Tax Identifier Number (TIN)

  • full buyer and seller profiles

  • exact timestamps

  • precise item descriptions

  • traceable payment trails

This is important for:

  • tax audits

  • SST verification

  • TP (transfer pricing) risk assessment

  • AMLA investigations

  • sector compliance reviews

  • revenue intelligence analytics

Industries excluded from consolidation tend to fall under Malaysia’s regulated sectors (aviation, utilities, telco, gaming), where detailed records are a standard requirement.

SME Implications … How This Affects Your Business

1. SMEs Must Immediately Confirm Whether They Qualify

If your business lies even partially in the excluded sectors, you cannot rely on consolidation. You must prepare for full transaction-by-transaction e-invoicing.

2. POS/ERP Systems Must Be Updated

Your software must support:

  • real-time validation

  • large-volume individual submission

  • handling of special data fields

  • customer TIN (if B2B)

  • industry-specific billing rules

3. Staff Training Becomes Essential

Cashiers, accounts clerks, sales teams, and back-office staff must understand:

  • When to apply consolidation

  • When consolidation is prohibited

  • What triggers the RM10,000 rule

  • What data IRBM requires for validation

4. Commission Structures and Agent Payments Become Transparent

Because agent/dealer payments require individual e-invoices, IRBM can now easily trace:

  • rebates

  • incentives

  • discount schemes

  • commission payouts

  • referral fees

This impacts both income reporting and withholding tax implications.

5. Expect Higher Audit Visibility

Industries on the exclusion list are now “data-rich sectors” for IRBM. Transaction-level visibility means faster detection of:

  • undervaluation

  • income suppression

  • missing invoices

  • suspicious patterns

  • inconsistent reporting

KTP’s View

At KTP, we see the exclusion of certain industries from consolidated e-invoicing as a deliberate, structured direction by IRBM to close revenue leakage and strengthen tax governance. Consolidation is never meant to be universal; it is a privilege reserved for low-risk B2C environments.

Industries with high-value, high-risk, or complex supply chains must maintain individual e-invoicing as part of Malaysia’s roadmap toward:

  • stronger compliance

  • real-time tax visibility

  • better sector governance

  • reduced manipulation opportunities

  • long-term digitalisation of national revenue systems

Early preparation will protect SMEs from validation failures, penalties, and audit exposure. The key is to understand your eligibility and design processes that match the IRBM guidelines before enforcement tightens.

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