Malaysia and SST

After the abolition of goods and services tax (GST) in Malaysia, Sales Tax Act and Service Tax Act came into force in 2018. The sales and service tax (SST) were in effect before GST was reintroduced.

Key Differences Between the Two Tax Regimes

The scope of GST was detailed. It meant that a detailed range of goods and services were taxed. The SST, allows more products to be tax-free. The other main difference is the actual percentage of tax levied on sales.

SST also does not implement an advance tax deduction system for taxes incurred. Advance tax relief means that companies can deduct the tax currently paid on inputs when they pay output (product) tax. Therefore, the taxpayer only has to pay the difference between output (product) tax and advance tax. Thus, businesses no longer need to calculate the advance tax deduction to obtain the discount. It is good news for small businesses that often incur additional costs.

The New SST Regime in Brief

Sales

Sales tax collects on taxable goods produced in or imported into Malaysia. Exported finished goods will not be subject to sales tax. Tax rates will be 5% and 10%. Goods that do not have a sales tax exemption feature are taxable.

S-tax is a one-tier tax. Besides, it applies at the import/producer stage of the supply chain. To maintain the one-step principle, producers will be exempt from sales tax on raw materials and packaging materials.

Services

Service tax collects on services that are commercially accepted in Malaysia. The service tax rate is 6%. Service tax is also a one-tier tax levied by the service provider. There is no input or exemption mechanism in the context of service tax.

Services specifically envisaged to be subject to service tax include hotels, restaurants, telecommunications, gaming, professional and consultancy services, motor vehicle repair, credit cards, domestic flights, IT services, and electricity use.

Sales Tax and Service Tax

Drawing Up an Invoices: Mandatory for the registered producer/person who sells taxable goods/services. It should be issued in national language / English with the details provided in print or electronic form.

SALES TAX AND SERVICE TAX PAYMENT METHOD

Sales tax and service tax are paid electronically via the MySST system [Financial Process Exchange (FPX)]. Apart from this method, payment can also be made by check or bank draft.

For the payment of taxes online, the maximum allowable payment is as follows:

– For corporate account payments (B2B), the amount is RM 100 million (the US $ 24.3M).
– For personal account payments (B2C), the amount is RM 100,000 ($ 243K).
Any online tax payment or payment must cover all taxes due and payable as specified in the return. However, due to the maximum payment limitation allowed above, partial payment is made by check or bank draft. It is then mailed to the Customs Clearance Center (CPC).

Payment will be remitted to the Government, together with SST returns, by the last day of the month following the end of the taxable period.