SST in Malaysia (Sales and Service Tax)

What is Sales and Service Tax (SST)

Three years ago in May of 2018, SST was officially introduced by the country’s Ministry of Finance and will be replacing the old Goods and Services Tax (GST) which would be phased out soon, where since its implementation, many people have believed that the GST has increased living costs. The decreasing of the rate of GST’s 6% to 0% marks the beginning of the transition towards SST which aims to provide more purchasing power for consumers, particularly low-and-middle-income earners.

Taking the place of the old GST, the new SST is proposed to act as the main revenue collecting instrument for Malaysia and officially went into effect in September of 2018. The Sales and Service Tax (SST) is made up of two main taxes: sales tax and service tax, which we will be mentioning later in the article. Goods will be taxed between 5 and 10% under the new SST, while services are taxed at 6%. Nevertheless, under the new SST, the number of goods exempted from the tax is much more compared to that of GST despite both of them actually having a lot of commonalities in the way they work.

Sales Tax and Service Tax

The SST consists of two main components, the Sales Tax and the Service Tax:

Sales Tax

A one-time tax on things domestically created and produced in Malaysia, including those which are imported, which is imposed

either at the time of importation or when the goods are sold or otherwise disposed of by the maker.

Service Tax

A consumption tax that is imposed on taxable services rendered in the conducting and advancement of business by any taxable person in Malaysia.

Who Are Subjected to SST

Businesses or industries that are providing taxable goods and services are all subjected to SST and required to apply for SST registration.

Businesses that are exempt from SST registration can also apply voluntarily to the Director-General of Customs for SST registration.

Threshold of SST

Any taxable goods and services provided by the local or international businesses in Malaysia are required to pay SST if the yearly revenue exceeds the threshold of RM 500000. On the other hand, the SST threshold for restaurants, cafés, canteens, bars, and any other establishment that provides clients with anything to drink or eat is RM1,500,000.

Rate of SST in Malaysia

Rate	Goods and Services Subjected
10% (Standard)	The tax on goods is charged to the end consumer throughout the B2B chain and is non-tax-deductible, including an obligation for imported items, with a low-value exemption.
6% (Standard)	The tax on services is only owed when they are provided to a non-taxed end consumer with services that are imported and exported are excluded.
5% (Reduced)	The tax rate will be lower however, for goods like oils and petroleum, building materials, telecommunications, groceries, IT, and printing supplies and hardware.

Goods Exempted from SST

Goods that are manufactured for export are not subjected to the tax.

Other goods that are exempted from the tax are:

Live Animals (Live horses, sheep , fish and etc.)
Food Items (Rice, beef, mutton, seafood, vegetables, drinks and etc.)
Medicine
Construction Material
General Goods (newspaper, book, etc.)
Vehicle (bicycle, motorcycle below 250cc, fork-lifts and crane)

Persons Exempted from SST

Schedule A: Persons classified as Rulers of States, Federal or State Government Departments, Local Authorities, Inland Clearance Depots, and Duty Free Shops, for example.

Schedule B: Exemption from tax on the procurement of raw materials, components, and packaging for use in manufacturing operations by manufacturers of designated non-taxable items.

Schedule C: Exemption from tax on the purchase of raw ingredients, components, and packaging for use in the manufacture of taxable foods by a registered manufacturer.