Sales and Service Tax (SST) in Malaysia

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.

*update* To ensure that our local service providers are not unfairly disadvantaged against their foreign competitors, Service Tax be imposed on the taxable services imported into Malaysia. The imposition of Service Tax on imported services will be carried out in 2 phases, services imported by Malaysian businesses from 1 January 2019 while services imported by Malaysian consumers from 1 January 2020.

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

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.

Related Blog and News about SST in Malaysia

• Duty-Free Islands Will Still Be Taxed Under SST in Malaysia
• Service Sector Remain 6% from GST into SST in Malaysia
• SST Malaysia to Impose 5-10% Tax on Goods and 6% on Services
• 15 Items Exempted from Sales and Services Tax (SST)
• Malaysia SST Custom
• Transitioning from GST to SST in Malaysia
• Breaking Down the SST in Malaysia
• Customs Department Says Essential Items Will Not Be Taxed SST
• Malaysia’s GST vs SST – Knowing the Difference
• SST Takes Effect in Malaysia on Sept 1

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