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Sales and Service Tax (SST) in Malaysia

The Ministry of Finance (MoF) announced that Sales and Service Tax (SST) which administered by the Royal Malaysian Customs Department (RMCD) will come into effect in Malaysia on 1 September 2018.

The move of scrapping the 6% GST has paved the way for the re-introduction of SST 2.0, which will come into effect in 1 September 2018. Before the 6% GST (that was implemented in 2015), Malaysia levied a Sales Tax and a Service Tax. Governed by the Sales Tax Act 2018 and the Service Tax Act 2018, the Sales Tax was a federal consumption tax imposed on a wide variety of goods while the Service Tax was levied on customers who consumed certain taxable services. Special designated areas that include Langkawi Island, Tioman Island and Labuan Island are exempted from the Service Tax. This page will help you to understand what SST is and how it will affect us.

Sales and Service Tax

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Transitional from GST to SST

When the GST Act 2014 is repealed, you are automatically ceased to be a GST registered person. You are not required to apply for deregistration. However, you are required to submit the final GST return within 120 days from the Act being repealed (by 28 December 2018).

After 1 September 2018, Custom audits for GST closure purposes would be carried out on GST registered entities.

Companies have to declare SST return (SST-01) every 2 months (bi-monthly) according to the taxable period. SST return has to be submitted not later than the last day of the following month after the taxable period ended.

Manufacturers / Services Provider who are GST Registered Persons which have been identified and fulfilled the required criteria will be registered automatically as Registered Manufacturer under Sales Tax / Registered Services Provider under Service Tax. Registered Manufacturer / Services Provider need to charge tax beginning 1 September 2018.

GST registered person who fulfilled the required criteria to be registered but were not registered by 1 September 2018 need to apply for registration through the MySST system within 30 days from the commencement date.

Registration is auto approve within 24 hour for a GST registrant. If a verification process is required, it will take longer processing time.

You may download the specific SST industry guide at Custom Website for more information.

Malaysia Service Tax 2018

Malaysia’s Service Tax is a form of indirect tax imposed on any provision of taxable services made in the course or furtherance of any business by a taxable person in Malaysia. Service tax is not chargeable on imported services and exported services.

In general, the services provider is liable to be registered under the Service Tax Act 2018 when the value of taxable services provided for a period of 12 months that exceeds a threshold of RM500,000. The SST registration threshold is RM1,500,000 for Operator of restaurant, bar, snack-bar, canteen, coffee house or any place which provides food and drinks (eat-in or take-away , exclude canteen in an educational institution or operated by a religious institution or body), Caterer and Food court operator.

Refer to the Service Tax Threshold Table for more information.

The Service Tax rate is fixed at 6%. A specific rate of tax of RM25 is imposed upon issuance of principal or supplementary card and every subsequent year or part thereof.

The following taxable services are subject to the service tax:

  • Hotel (include lodging house, service apartment, homestay, Inn, rest house, boarding house)
  • Insurance and Takaful
  • Service of food and beverage preparation (include restaurant, cafe, catering, take-away, food truck, retail outlet, hawkers and etc)
  • Club (include Night club, private club, golf club)
  • Gaming (include Casino, game of chance, sweepstakes, gaming machines, lottery, betting)
  • Telecommunication
  • Pay-TV
  • Forwarding agents
  • Legal
  • Accounting
  • Surveying
  • Architectural
  • Valuer
  • Engineering
  • Employment agency
  • Security
  • Management services
  • Parking
  • Motor vehicle service or repair
  • Courier
  • Hire and drive car
  • Advertising
  • Domestic flight except Rural Air Services
  • Credit or charge card
  • IT services
  • Electricity

 
However, the service tax cannot be levied on any services that are not in the list of taxable service.

 

Accounting Basis for Service Tax

Companies shall prepare their SST return in payment basis for Service Tax purposes. Service Tax required to be accounted for at the time when the payments are received or on the day following period of twelve months when any whole or part of the payment is not received from the date of the invoice for the taxable service provided.

Companies who provide taxable services must issue invoices containing the prescribed particulars. The invoices can be in hardcopy or electronically, Bahasa Melayu or English. Any credit notes and debit notes issued shall make an adjustment in SST return.

Bad debts can be claimed by a registered person or a Ceased to be registered person. The bad debts can be claim after 6 months to 6 years from the date of service tax was paid and subject to condition and satisfaction of the DG. For bad debts recovered from the debtor after bad debts claimed and received the service tax refund, the registered person must repay the service tax refund to DG in his return.

The businesses must keep its records in Malaysia for 7 years. It is subjected to the DG approval for record keeping at overseas. The record can be kept in softcopy or hardcopy.

Sample Invoice for Service Tax

Sample Invoice for Service Tax

Malaysia Sales Tax 2018

The Sales Tax, a single stage tax, was levied at the import or manufacturing levels. In Malaysia, it is a mandatory requirement that all manufacturers of taxable goods are licensed under the Sales Tax Act 2018. Government collects Sales Tax at the manufacturer’s level only and the element of sales tax embedded in the price paid by the consumer.

Companies (Manufacturer or Sub-contractor) with a sales value of taxable goods exceeded RM500,000 for 12 months period are liable to be registered under the Sales Tax Act 2018.

Goods which are not exempted through Proposed Sales Tax (Goods Exempted From Sales Tax) Order will be charged sales tax at various rates (5% to 10%) prescribed. Sales tax for petroleum is charged on a specific rate which is different from other taxable goods.

Refer to Proposed Sales Tax Rate for Various Goods for more information.

The following manufacturing activities have been exempted from SST registration:

  • Tailoring
  • Installation incorporation of goods into building
  • Jeweller, optician

 

Accounting Basis for Sales Tax

Companies shall prepare their SST return in accrual basis for Sale Tax purposes. Sales Tax required to be accounted at the time when the goods are sold, disposed or first used.

Companies who sells taxable goods must issue invoices containing the prescribed particulars. The invoices can be in hardcopy or electronically, Bahasa Melayu or English. Any credit notes and debit notes issued shall make an adjustment in SST return.

Bad debts can be claimed by a registered manufacturer or a person who ceased to be registered manufacturer. The business shall claim within 6 years from the date the taxable goods is sold and subject to condition and satisfaction of the DG. For bad debts recovered from the debtor after bad debts claimed and received the sales tax refund, the registered manufacturer must repay the sales tax refund to DG in his return.

The businesses must keep its records in Malaysia for 7 years. It is subjected to the DG approval for record keeping at overseas. The record can be kept in softcopy or hardcopy.

 

Overview of Sales and Service Tax (SST) in Malaysia

Sales and Service Tax (SST): Boon or Bane?

The government will re-introduce Sales and Services Tax (SST) to replace the existing tax system. While many people hold different views towards the government’s decision, it is important for us to understand the difference between these two tax system and its impact.

Both SST and GST are consumption tax. The SST is a single stage of consumption tax while GST is a multi-stage of consumption tax on goods and services that were levied at every stage of the supply chain. The rates of SST stand at 10% (for sales tax) and 6% (for services tax) that charge on the final production and service only. Under the SST tax regime, the range of taxable items and exemptions is lesser if compared with the GST’s tax regime. 

Unlike SST, the 6% GST applies equally on every stage of supply chain, from the supplier, manufacturer, whole seller and to the retailer. The range of exemptions and taxable items are much wider which means that all the goods and services are subject to GST unless it’s exempted items such as essential goods, healthcare services, and public transport. 

 

Key Takeaways:

  1. The SST is levied at the consumer end while the GST is paid by all companies.
  2. The SST is payable when consuming good while GST is payable on every transaction between companies before reaching the end consumer.
  3. The Sales Tax will only be imposed on the manufacturer or consumer level, while the Service Tax is taxed on consumers that are using tax services.
  4. The GST, which stands at a flat rate of 6%, while the SST rates vary from 5-10% to specific rates.
  5. The GST covers everyone, while the sales tax only covers manufacturers and services tax covers certain prescribed services like professional services.

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