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The Malaysian government abolished GST and introduced SST, which reformed the country’s tax system. This guide outlines the topics you need to know about sales and service tax (SST) in Malaysia.
Let’s start with how GST was abolished.
Abolishment of GST in Malaysia
Goods and Services Tax (GST) was implemented on 1 April 2015 at a standard rate of 6%. However, three years later, in May, Malaysia’s Ministry of Finance announced that GST would be abolished and replaced by SST.
A tax holiday was declared on 1 June 2018, and the GST rates were reduced from 6% to 0%, which was the beginning of the transition from GST to SST.
The objective of abolishing the GST was to put more purchasing power in the hands of the Malaysian people, especially the lower- to middle-income earners. Many people believed that GST increased living costs since it was implemented.
On 31 August 2018, GST was abolished, and SST was implemented on 1 September 2018.
What is Sales and Service Tax?
The SST comprises of two elements:
- Sales tax: A single-stage tax imposed on products manufactured and produced locally and on taxable goods imported into Malaysia.
- Service tax: A consumption tax imposed on taxable services provided in Malaysia by a registered service provider carrying out their business.
1. Sales tax
What are taxable goods?
Taxable goods under sales tax refer to goods produced and imported into Malaysia.
Some taxable goods are:
- Articles of plastic, rubber and leather
- Bird’s nest and honey
- Cosmetics and perfume
- Edible preparations
- Fat and oil
- Fruit juice
- Milk and dairy products
- Musical instruments
- Oil seeds
- Preparation of vegetables, fruits and nuts
- Preparations of crustaceans, molluscs or other aquatic invertebrates
- Preparations of meat
- Soap, wax and polish
- Tobacco and manufactured tobacco substitutes
What goods are exempted from sales tax?
Exempted goods include:
- Books, magazines, newspapers and journals
- Coffee and tea
- Goods manufactured for export
- Insecticides and disinfectant
- Live animals, fish and seafood and eggs
- Meat and edible meat offal
- Pharmaceutical products
- Wood pulp and waste of paper
Persons and manufacturers exempted from sales tax
According to the Sales Tax (Person Exempted from Payment of Tax) Order 2018, the following persons are exempted from sales tax:
- Schedule A
- Yang di Pertuan Agong (Paramount Ruler or King)
- Ruler of the State
- Federal or State Government Department
- Local authority
- Malaysian Armed Forces
- Duty-free shops
- Public Higher Education Institution
- Schedule B
- Manufacturers approved by the Director-General
- Manufacturers of specific non-taxable goods, tax exemption on acquisition of raw materials, components, packaging materials and manufacturing aids to be used solely and directly in manufacturing activities.
- Schedule C
- Registered manufacturers of taxable goods – exemption of tax on the acquisition of raw materials, components, packaging materials and manufacturing aids to be used solely and directly in manufacturing of taxable goods.
What are the sales tax rates?
The rates for sales tax are:
- 5% – Goods including basic foodstuffs, building materials, fruit juices, personal computers, mobile phones and watches
- 10% – For other goods except for petroleum subject to specific rates and goods that are not exempted
A detailed list of the taxable goods tax rates can be read here.
2. Service tax
What are taxable services?
Taxable services are categorised into group A to I in Malaysia and include:
- Group A – Accommodation
- Group B – Food and beverage
- Group C – Night clubs, dance halls, cabarets, health and wellness centres, massage parlours, public houses and beer houses
- Group D – Private clubs
- Group E – Golf club and golf driving ranges
- Group F – Betting and gaming
- Group G – Professionals
- Legal services
- Accounting, auditing, bookkeeping and consultancy
- Surveying services
- Engineering consultancy
- Architectural services
- Consultancy services
- Information technology services
- Management services
- Employment services
- Group H – Credit card and charge card
- Group I – Other service providers
- Advertising services
- Cleaning services
- Courier delivery services for documents or parcels not exceeding 30kg
- Foreign digital services
- Hire car services
- Insurance services (excluding life or medical insurance)
- Local air travel
- Services for clearing of goods from customs control
- Servicing and repair of motor vehicles
- Subscription broadcasting services
- Telecommunication services
- Theme parks
What is the service tax rates?
The rate for service tax is 6% for all taxable services. Services that are imported or exported are exempted from service tax.
Who is a taxable person?
A taxable person is a manufacturer or service provider who is subject to SST registration.
Businesses that are exempted from SST registration may voluntarily apply for SST registration with the Director-General of Customs.
Which businesses must apply for sales and service tax registration in Malaysia?
Businesses that provide taxable goods and services must register for SST if they meet the following conditions:
- Manufacturing taxable goods
- Total sales value within the last 12 months exceed RM 500,000
- Providing taxable services
- Total value of taxable series within 12 months exceeds the prescribed threshold, which is usually RM 500,000, but certain services may have a different threshold.
|Taxable service provider||Threshold|
|Operators of restaurants, bars, snack-bars, canteen, coffee house or any place providing food and drinks whether eat-in or take-away||RM 1.5 million|
|Persons who are regulated by Bank Negara Malaysia and provide credit card or charge card services||No threshold|
|Approved customs agents||No threshold|
How to register for sales and service tax in Malaysia?
The SST registration due date is the last day of the month following the month in which the total sales of taxable goods or services exceed the threshold.
For example, if the total sales exceed the threshold on 31 May, the last day to apply for SST registration is 30 June.
Businesses that are exempted from SST must also submit an application for exemption through the MySST website.
Are foreign companies required to register for sales and service tax in Malaysia?
Foreign companies that do not have a permanent establishment in Malaysia are not liable to register for sales tax or service tax.
Voluntary registration is also not available for foreign companies.
When to file the sales and service tax return?
The taxable period for the SST return is every two months. Even if there is no tax to be paid, the return must be filed.
The SST payment must be made within 30 days from the end of the taxable period.
SST can be filed online through the CJP system or by downloading the Form SST-02 from the MySST portal and mail it to the Customs Processing Centre (CPC) by post.
The address is:
Jabatan Kastam Diraja Malaysia Pusat Pemprosesan Kastam Kompleks Kastam Kelana
Jaya No.22, Jalan SS6/3,
47301 Petaling Jaya,
Penalties are imposed on the following offences:
|Failure to file the SST returns||A maximum fine of RM 50,000, maximum imprisonment of three years, or both|
|Failure to make SST payment||A maximum fine of RM 50,000, maximum imprisonment of three years, or both|
|Late payment||10% of charges are imposed on the outstanding amount of SST in the first 30 days. For the second 30 days, an additional 15% is imposed and the third 30 days, another 15% of the charges is imposed.|
|Tax evasion||First offence – minimum fine of 10 times and a maximum of 20 times of the sales tax amount, maximum imprisonment of five years, or both|
Second offence – minimum fine of 20 times and a maximum of 40 times of the sales tax amount, maximum imprisonment of seven years, or both
SST in Malaysia was introduced to replace GST in 2018. The current tax rate for sales tax is 5% and 10%, while the service tax rate is 6%. If your company is already GST-registered, the MySST system will automatically register your company for SST. For advice on SST, do not hesitate to contact Acclime.
Acclime is Asia’s premier tech-enabled professional services firm. We provide formation, accounting, tax, HR and advisory services, focusing on delivering high-quality outsourcing and consulting services to our local and international clients in Malaysia and beyond.