Transitioning from GST to SST in Malaysia
Tax Changes are Coming to Malaysia
There’s going to be a change of tax in Malaysia come 1 st September 2018. The new tax which is going to be introduced is known as the Sales and Services Tax (SST), and the SST is set to replace the Goods and Services Tax (GST) in Malaysia. The move of scrapping the 6% GST has paved the way for the re-introduction of SST, 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.
Below, you will find everything that you need to know about the upcoming SST:
How to Register for SST
For those who were registered for the GST before (and even those who have not registered for GST), you may register for the upcoming SST online through the MySST system. Applications through the MySST system will be automatically approved within 24-hours for all existing GST registrants, unless there is a verification process required which may then take a longer time for approval.
Companies will be able to apply for voluntary SST registration as long as the manufacturing goods are taxable and below the threshold. Any persons exempted from registration will be able to proceed with voluntary registration.
All those who are already registered under the GST system will automatically cease to be liable for GST registration upon the repeal of the GST Act 2014. You will not be required to apply for a deregistration of the GST, but you will be required to submit the final GST return within 120 days from the repeal of the act.
Registrants of the existing GST system will automatically be liable for SST registration, and you will be informed with a formal letter of notification on your business or personal email from 1 August 2018.
Every two months, all registrants of the SST will be required to declare their SST returns and apply to the Director General for the specified taxable period. All SST returns must not be submitted later than the last day of the following month, after the taxable period has ended or risk being hit with a penalty. Returns can be submitted either by post or electronically. Returns must be submitted whether the tax has been paid or not.
SST in Malaysia and How It Works
The new sales tax will be imposed at a rate of either 5%, 10% or a specific amount will be for petroleum products. The service tax rate will be 6%.
- It is a single-stage tax, which means that an amount is charged on taxable goods which are manufactured and sold by any taxable person(s) in the country. An amount will be charged on taxable goods which are imported into the country.
- Service tax is applicable for taxable services which are provided in the country.
- Manufacturers of taxable goods and services with a turnover which exceeds the amount of RM500,000 are defined as taxable persons. Anyone who provides taxable services which include hotel, telecommunication, accounting and more, are also considered taxable persons.
- Invoicing for taxable services must be done from 1 September onwards.
- All registered persons must keep records of their SST submissions for up to 7 years.
- Records of SST can be kept in English and Bahasa Melayu if it is within Malaysia. It can be kept outside Malaysia in soft or hard copy with the approval of the Director General.
- All SST tax returns must be submitted to the Royal Malaysian Customs Department on a regular bi-monthly basis.
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
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.
The following manufacturing activities have been exempted from SST registration:
- Installation incorporation of goods into building
- Jeweller, optician
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.
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 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)
- Forwarding agents
- Employment agency
- Management services
- Motor vehicle service or repair
- Hire and drive car
- Domestic flight except Rural Air Services
- Credit or charge card
- IT services
However, the service tax cannot be levied on any services that are not in the list of taxable service.
Those who were registered under the GST will be able to claim an input tax credit within the first 120 days from the time the SST comes into effect as long as they account for 0% GST and declare their output taxes in their final GST returns.
Previous special schemes which were applicable under the GST system will no longer be applicable under the new SST. These schemes include Approved Trader Scheme (ATS), Approved Toll Manufacturer Scheme (ATMS).
Beginning 1st September 2018, audits will be carried out on all entities registered under the GST.