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Guide to Sales and Service Tax (SST)

Sales Tax

What is Sales Tax?

Sales tax is a single stage tax levied on imported and locally manufactured goods, either at the time of importation, or at the time the goods are sold or otherwise disposed of by the manufacturer.

Goods subject to Sales Tax

Goods which are NOT listed under the Sales Tax (Goods Exempted From Sales Tax) Order 2018 are subject to sales tax.

Registration Information

Businesses Required to Register

1. Taxable goods manufacturers are required / liable to be registered when:

  • SALES VALUE OF TAXABLE GOODS has exceeded RM500,000 for 12 months period

2. Manufacturers who carry out sub-contract work on taxable goods where the VALUE of work performed exceeds RM500,000 for 12 months period.

  • The Taxable Goods belong to: a registered manufacturer, a non-registered manufacturer, or manufacturer in special area (FIZ and LMW).
  • Note: Registered Person will be known as Registered Manufacturers

3. Exempted from Registration but can Register Voluntarily:

  • Manufacturers of taxable goods below threshold;
  • Sub-contracted manufacturers of taxable goods below threshold; and
  • Manufacturing activities that have been exempted from registration, like tailoring, Installation incorporation of goods into building, jeweler, optician

4. Exempted from Registration but are not eligible for Voluntary Registration

  • Manufacturer of non-taxable goods

Types of Registrations

Transitional Registration

  • Manufacturer who is liable to be registered is required to register before 1st September 2018
  • Registration commencement date will be on 1st September 2018

Automatic Registration

  • Manufacturers who are GST Registered Persons, who have been identified and fulfilled the required criteria, will be registered automatically as Registered Manufacturers under Sales Tax.
  • Registered Manufacturers need to charge tax beginning 1st September 2018

Persons Not Registered Automatically

  • GST registered persons who fulfilled the required criteria to be registered but were not registered by 1st September 2018 need to apply for registration within 30 days from the commencement date.

Determination of Turnover

Manufacturers should calculate the sales value of taxable goods for a period of 12 months using the following methods:

Historical Method:

  • The total value of taxable goods in that month and the 11 months immediately preceding the month;

Future Method:

  • The total value of taxable goods in that month and the 11 months immediately succeeding the month

Submission of Sales Tax Returns

1. A registered manufacturer has to declare sales tax return (SST-02) every two months according to the taxable period. You may apply to the Director General for a specific taxable period e.g. in line with your financial year end.

2. Sales tax return has to be submitted not later than the last day of the following month after the taxable period ended.

3. Sales tax return has to be submitted regardless of whether there is any tax to be paid or not.

4. Sales tax return has to be submitted electronically or by post to Customs Processing Center (CPC).

Penalties

Non-Compliance

Penalties may be imposed if the following offences are committed:

  • Any deficiency on the net tax payable
  • No SST return is made
  • A SST return is submitted without payment or a lesser payment
  • Failure to register

Penalty for Late Payment

i. 10% – first 30 days period.

ii. 15% – second 30 days period.

iii. 15% – third 30 days period.

iv. Maximum penalty 40% after 90 days

Service Tax

What is Service Tax?

Service tax is a tax charged and levied on taxable services provided by any taxable person in Malaysia in the course and furtherance of business.

  • Taxable person is a person who provides taxable services in the course or furtherance of business in Malaysia and is liable to be registered or is registered under the Service Tax Act 2018.
  • Taxable service is any service which is prescribed to be a taxable service.

Service tax is not charged on imported nor exported services.

Rate of tax

  • Fixed at a rate of 6%.
  • Provision of credit card or charge card services:
    • A specific rate of tax of RM 25 is imposed upon issuance of principal or supplementary card and every subsequent year or part thereof

Registration Information

Taxable Services, subject to Threshold
  • Hotel
  • Insurance and Takaful
  • Food and beverage
  • Club
  • Gaming
  • Telecommunication/Pay-TV
  • Forwarding agents
  • Legal
  • Accounting
  • Surveying
  • Architectural
  • Valuer
  • Engineering
  • Consultancy
  • 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

Exclusions:

  • Private hospital (on ward and food charges only)
  • Veterinary
  • Advocates and Solicitors, Public Accountants, Surveyors, Professional Engineers, Architects, Management Services are excluded if the said services are provided in connection with:
    • goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia; or
    • any statutory fees paid to the government or statutory body

Branch Registration is allowed for Service Tax.

Group Registration is not applicable

Voluntary registration –

  • By application;
  • Provides taxable services: The total amount of taxable services provided by him in 12 months is below threshold;
  • Subject to conditions determined by DG

Types of Registration

Transitional Registration

  • Taxable Service Provider who is liable to be registered is required to register before 1st September 2018
  • Registration effective date will be on 1st September 2018

Automatic Registration on 1st September 2018

  • Taxable Service Provider who are GST Registered Persons which have been identified and fulfilled the required criteria will be registered automatically as Registered Person under Service Tax.
  • Registration Person need to charge tax beginning 1st September 2018

Persons Not Registered Automatically

  • GST registered person who fulfilled the required criteria to be registered but were not registered by 1st September 2018 need to apply for registration within 30 days from the effective date.

Determination of Turnover

Mandatory

Any person providing taxable services is liable to be registered if the total amount of taxable services is prescribed, the total amount of taxable services provided by him in 12 months exceed threshold and the liability to be registered is at the following time whichever is the earlier.

Historical Method

  • The total value of taxable goods in that month and the 11 months immediately preceding the month;

Future Method

  • The total value of taxable goods in that month and the 11 months immediately succeeding the month.
  • In the case no amount of taxable services is prescribed, the liability to be registered is on the date of the commencement of the business.

Submission of Service Tax Returns

1. Registered person has to declare service tax return (SST-02) every two months according to the taxable period. You may apply to the Director General for a specific taxable period e.g. in line with your financial year end.

2. Service tax return has to be submitted not later than the last day of the following month after the taxable period ended.

3. Service tax return has to be submitted regardless of whether there is any tax to be paid or not.

4. Service tax return has to be submitted electronically or by post to Customs Processing Center (CPC).

Penalties

Non-Compliance

Penalties may be imposed if the following offences are committed:

  • Any deficiency on the net tax payable
  • No SST return is made
  • A SST return is submitted without payment or a lesser payment
  • Failure to register

Penalty for Late Payment

i. 10% – first 30 days period.

ii. 15% – second 30 days period.

iii. 15% – third 30 days period.

iv. Maximum penalty 40% after 90 days