The introduction of SST in Malaysia
The introduction of SST in Malaysia officially took effect on September 1, 2018, which replaced the Goods and Services Tax (GST). The 6% GST was introduced in Malaysia in 2015, and the SST is a lot similar to this system. The goods that get tax exemption from SST are ten times more compared to the GST. There was a total exemption of 5,443 items, and only a few businesses are required to pay SST if compared to GST.
An expected benefit that comes from SST is that there is a lower cost of living, and the sales tax is charged only once by the point of sale (POS) manufacturer. The manufacturers will be obliged to be more effective with costs, so they remain competitive. With the service tax food and beverage threshold that increased to RM1.5 million every year, take away food places, hawker centres, and small restaurants can now sell food at a lower cost. Therefore, the SST should be more popular in comparison to the GST.
The Sales Tax in Malaysia
The Sales Tax is a single-stage tax that is imposed at the levels of import and production. The taxable products being sold in Malaysia are taxed in a way prescribed by the Sales Tax Act 2018. Based on this act, the government only collects sales tax at the manufacturer’s level. In addition, the sales tax should be paid by the consumer. However, the tax rate for all products is not always the same. This is why goods that have no tax exemption from sales tax are taxed at various rates like 5% or 10%.
The Service Tax in Malaysia
Malaysia’s Services Tax is an indirect tax that is imposed on a taxable service provided by a taxable individual in Malaysia. It was provided according to the name or with the company’s approval. However, it must be noted that taxes are not imposed on services that are imported or exported. The imported and exported service taxes have no charge. Service providers should register based on the 2018 Service Tax Act in case the total taxable services amount provided over 12 months is at least RM500,000. However, this is not applicable to all business activities done in Malaysia. The registration limit is RM1,500,000.
Taxable and Exempted Goods
Based on the proposed SST framework, the sales tax will be charged on taxable goods manufactured in Malaysia or imported there. The manufactured items that other countries export will not have sales tax imposed on them. Under the SST, manufacturers can be exempted from formless tax paid on raw materials and other production inputs.
Among items that are not taxable are live animals, milk rice, cream, certain vegetables, bread, cooking oil, sanitary pads, and newspapers. Some vehicles will not be taxed like disabled person carriages, bicycles, and motorcycles that are below 250cc.
When it comes to services, the tax will be levied on certain services provided by a taxable individual doing business in Malaysia. The service tax is not charged on imported or exported services. The specific prescribed services include homestay operators, hotels, restaurants, telecommunications, professional, consultancy and professional services, gaming, domestic flights, credit cards, IT services and electricity.
For businesses that have an annual turnover that exceeds more than RM500,000, the registration process should be online through the MySST system within 12 months since September 1.
The ones that are already registered under GST will have automatic registration in the MySST system. Businesses could apply for the voluntary registration regime from the manufactured taxable goods that do not meet the yearly turnover threshold.
Filing Returns of Sales Tax
Under the SST, businesses that are registered must file tax returns based on bi-monthly. The return should be filed not later than the last day of the month that follows the taxable period. Here are the penalties for late returns:
- 10% in the first period of 30 days
- 15% on the 2nd period of 30 days
- 15% on the 3rd period of 30 days
- 40% as the maximum penalty after 90 days
Everyone, especially businesses, should understand the SST tax in Malaysia. If you need more guidance about this, you can contact 3E Accounting for their SST services in Malaysia. They can help you understand it and even do your taxes for you. This way, you do not have to worry about not being able to file returns at the right time.