It is very important to understand the sales and service tax (SST) in Malaysia if you are residing in this nation for businesses or permanently. Before you get a concept on this Salas and service tax (SST), you must first understand Malaysia’s Service Tax.
It is typically a type of passive taxation system that can be imposed on any taxable services or businesses made at any time. This is implacable on any person in Malaysia who is eligible for taxes. However, few Services have been exempted from this service tax for a long period, for instance, import and export services are excluded from this chargeable tax process until the latest policies that tell a different story.
From 1st January 2019 the service takes supposed to be imposed on the imported services carried out by Malaysian businesses. On the other hand, service taxes for imported services carried out by Malaysian consumers suppose to take an act from the beginning of January 2020.
All about SST
Now as you have a concept on Malaysian service tax, let’s get back to SST.SST or Sales and Service Tax (SST) in Malaysia are generated and goes to the national treasury from the general service providers in Malaysia. They are liable to register for this service tax under the 2018 Act.
A 6% rate has been fixed for SST by the Ministry of Finance on 1st September 2018. This sales and tax service is governed by the Royal Malaysian Customs Department (RMCD). It was previously known with different identity; which is GST or Goods and Service Tax, introduced and implemented in 2015. This is later on replaced by the re-introduced Tax service with the name Sales and Service Tax or SST.
The taxation service falls under Malaysian Sales Tax Act 2018 and the Service Tax Act 2018. Both sales and service taxation processes were treated separately, that is the Sales Tax was a imposed under federal law on wide range of consumption goods, whereas, Service Tax was imposed on consumers who enjoys services enlisted under this particular taxation law.
The SST is implacable for service which mostly include restaurant, bar, canteen, caterers or similar business operators. It has to be noted that, food distribution services and canteens operated under education institutes or religion organizations are excluded from this taxation list.
In order to be registered for the Sales and service tax in Malaysia, a service need to issue a tax submission supplementary card which will cost about RM25. Each tax payments are recorded every year in this particular card. It should be noted that SST rate is fixed at 6% for a list of services.
Below is the list of taxable services enlisted for Sales and Service Tax:
- Legal firms
- IT services
- Courier service
- Forwarding agents
- Credit card service
- Employment agency
- Hire and ride sharing
- Insurance companies
- Management services
- Domestic flight service
- Night club, golf club etc.
- Telecommunication companies
- Motor vehicle repair and servicing company
- Any types of Hotels, motels and resorts, Inn etc.
- Restaurant, Catering, Food carts, food trucks, take-away, retail etc.
- Gaming clubs which include Casino, Lottery, Sweepstakes, gaming machines, betting etc.
There are some services that are excluded from this taxable service.
Following are the service activities which have been exempted from SST registration:
- Installation of goods into corporate buildings
There are some designated locations in Malaysia which are treated with exceptions. There are some areas under Malaysian authority which have been exempted from this Sales and Service Tax (SST). Following are the areas for this tax exemption:
- Langkawi Island
- Labuan Island
- Tioman Island
Process of transition from GST to SST
The transition process from GST status to SST is very simple. As a service provider you don’t need to do anything as such. Following is the timeline of automatic process that takes place as the transition procedures behalf of a service provider:
- As soon as the GST Act 2014 has been abolished, a service provider automatically deregistered from the GST registered status. So, the service owner doesn’t need to make any move for the deregistration process.
- However, within 120 days of GST abolishment, the service provider needed to place the final Goods and Sales tax (GST) return.
- After 1st September 2018 it was ordered to all GST registered service providers that customer audits had to be published due to the final GST closures.
- From that time onward, all service providers are recommended to declare SST return at every 2 months intervals. Here SST return was rules to be submitted no later than the last day of every second month for any company. All GST registered vendors, manufacturers, service providers or any other GST registered individuals who have been identified to submit their final return got automatically registered to the SST at the beginning of 1st September 2018.
- However, if any deserving individual or service provider got skipped out for automatic SST registration by 1st September 2018, are recommended to manually register through the MySST system. This registration process must be carried out within 30 days from the commencement schedule.
- For others, the whole transition process was automatic, that is the registration process for SST was auto approved wit in a day for a valid GST registered service provider or individual. However, in some case it took a bit longer time due to additional verifications and approval processes.
Malaysia Sales tax Act 2018
Malaysia sales tax Act 2018 implies that all manufacturers of taxable goods are licensed under the Sales Tax Act 2018. Under this act, Government collects Sales Tax at the manufacturer’s level. It has also been rules that all the tax related information are mandatorily needed to be mentioned in the product or price recites delivered to the consumers during payment.
Retailers, manufacturer etc. whose sales value for taxable items exceeds RM500000 for a year straight is liable to be registered under the Sales Tax Act 2018 in Malaysia. Enlisted goods under Sales tax Act are predetermined for its rate of tax which is added with the core price. The tax rate is usually 5% to 10%. The tax rate of petroleum is however, excluded from this range. Goods related to petroleum therefore have its specific tax rate in Malaysia.
Malaysia Service Tax Act 2018
On the basis of Services, Companies are recommended to prepare their SST return payment. When entitled to pay the service tax, a company needs to issue invoices against the price fixed for a certain product. This invoice on which service tax is included or mentioned separately, are produced as hardcopy or electronically printed paper.
The Service tax is recommended to be mentioned in either Bahasa Malay or English. In case the price tag includes any credit or debit process are also presented in that invoice. These notes are however adjusted in SST return.
In order to keep up with the clean service tax under the service Tax Act 2018 Malaysia, a business is recommended to keep its records in a systematic manner. It is also recommended to keep the last 7 years records of SST up to date and ready available in both softcopy as well as hard copy. In case the records need to be kept overseas of any business in Malaysia, an approval of recommended higher authority is needed.