Following the change in government after the 14th general elections, the Ministry of Finance announced that the existing Goods and Services Tax (GST) would be abolished and replaced with the Sales Tax and Services Tax (SST).
The first step in this process was to zero rate the existing GST tax rate, and this was implemented from 1st June 2018. All taxable sales and purchases would be rated at 0% from June 2018 until further notice. This did not mean that GST was repealed or abolished. GST registered businesses would still have to comply with the requirements including recording of transactions as well as reporting on a monthly or quarterly basis.
On 31st July 2018, bills were tabled in Dewan Rakyat with the intention of repealing GST.
At the same time, the Sales Tax Act 2018 and Services Tax 2018 were also tabled to re-introduce the Sales and Services Tax to replace the GST.
The expected implementation date of SST is from 1st September 2018.
What is SST?
Unlike with GST, there are 2 parts to SST, each applying to different types of businesses.
- Sales Tax
This is levied on goods manufactured in or imported into Malaysia. Exported goods are not subject to Sales Tax.
Sales tax is imposed on manufacturers and sub-contractors.
Proposed rate for Sales Tax is said to be at 5%, 10% or a specified rate.
Sales Tax is accounted for on an accrual basis
- Service tax
Service tax is levied on service providers engaged in the business of providing specified services which include:
• Hotel • Insurance and Takaful • Service of food and beverage preparation • Clubs • Gaming • Telecommunication services • Pay TV • Forwarding agents • Legal • Accounting • Sureying • Architectural • Valuer • Engineering • Consultancy • Employment agency • Security • Management services • Parking • Motor vehicle service or repair • Courier • Hire and drive car • Advertising • Domestic flights (excluding rural air services) • Credit or charge card • IT services • Electricity (more than 600kWh)
The rate is 6%, except for credit/charge card, where it is charged at a fixed amount of RM25.00 per annum.
Services that are either imported or exported are excluded.
Service Tax is accounted for on a payment received basis.
Unlike GST, SST is a single stage tax, which means it is one level in the supply chain, either at the manufacturer/sub-contractor level or at the service provider level.
Threshold for registration
For both Sales and Service tax, the threshold for registration is RM500,000.00 over a 12 month period, using either the historical or future method. Businesses are required to register within 30 days of reaching the threshold.
Those that are already GST registered and are liable for registration will be automatically registered for SST. In such cases, Customs will notify the business by letter.
Businesses can register online through the Custom’s mySST system. (We do not have the details of this yet)
Businesses that are currently registered will automatically be de-registered once GST is repealed. No manual application to de-register is required.
Submission of SST returns
Businesses are required to submit SST returns on a bi-monthly basis, with the first taxable period being September and October 2018. The returns must be submitted no later than the last day of the following month. The first return therefore needs to be submitted not later than 30th November 2018.
For businesses that wish to change the reporting period to follow their financial year end, they will need to make an application to the Director General.
Returns can be submitted either online or by post.
You can get more information on Royal Malaysian Customs Department (RMCD)’s website on Malaysia Sales & Service Tax.