Sales and Service Tax (SST) in Malaysia

The Ministry of Finance (MoF) announced that Sales and Service Tax (SST) 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, 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, Timon 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.

 

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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.

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The following taxable services are subject to the service tax:
– Hotel (include lodging house, service apartment, home-stay, 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.

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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 month when any whole or part of the payment is not received from the date of the invoice for the taxable service provided.

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Companies who provide taxable services must issue invoices containing the prescribed particulars. The invoices can be in hardcopy or electronically, Bahasa Malay 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.

 

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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.

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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:
– Tailoring
– Installation incorporation of goods into building
– Jeweler, optician

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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 Malay 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)

Goods and Person Exempted from Sales Tax

SST Return Submission and Payment

SST Registration in Malaysia

SST Penalties and Offences in Malaysia