In Malaysia, Sales and Service Tax(SST) was officially re-introduced on 1 September 2018, replacing the former three-year-old Goods and Services Tax (GST) system. This guide covers everything you need to know about Sales and Service Tax in Malaysia as a small business owner.
Even though SST is not the same as GST in various aspects, there are still many similarities. Despite these similarities, one main difference lies in the number of goods or products exempted via sales and service tax(SST) is more than those exempted through GST.
SST(Sales and Service Tax) is comprised of two components.,
The first is the service tax to be levied and paid in conjunction with taxable services provided in and supported by any taxable individual in Malaysia.
The second is the sales tax levied on manufactured & locally produced goods, either to be imposed during the purchase of goods or at the time of the goods' disposal or sales.
Here is provided a chronology of events that lead to SST implementation beginning on 1 September 2018
Comparison Between SST and GST
Please refer to the table below for a comparison of two tax system:
Source – NST
What is Sales and Service Tax (SST)?
SST(Sales and Service Tax) consists of two separate taxes: the sales tax and the other one, the service tax
Sales Tax
- Sales tax is only applicable to taxable goods that are manufactured or imported into Malaysia.
- Exported manufactured goods will be excluded from the sales tax act.
- The sales tax rate is at 5%,10%, or on a specific rate or exempt. However, at the same time, not all products are necessary to be taxed. It is for this reason that goods are taxable unless specifically listed as being exempt from sales tax.
- The Sales Tax is a single-stage tax imposed only at one stage in the supply chain, i.e., at the import or manufacturing level.
- An exception will only be allowed for those manufacturers of taxable goods paid for their raw materials, components, and packaging materials.
Refer to Proposed Sales Tax Rate for Various Goods for more information.
How does sales tax works?
Service Tax
- Service Tax is charged on a specific service provided by a taxable person in Malaysia carrying out a business.
- The Service tax is also a single-stage tax with a rate of 6%.
- This tax is not required for imported or exported services.
- In the service tax, no input exemption mechanism is included.
Refer to the Service Tax Threshold Table for more information.
How does service tax works?
What Are the Different Types of Malaysia SST Rates?
Sales Tax @ 5%
Products charged with a tax rate of 5% are petroleum oils, construction materials, timepieces, cod liver oil, telecommunications, foodstuffs, IT, and printing materials and hardware. The tax rate for petroleum and oil are subject to high quantity-based rates.
Service Tax @ 6%
The services include car hire, accommodation, hotel, repair rental, domestic flight, insurance, restaurants, electricity, legal accounting, telecoms, business consulting services, and digital supplies. Please note that services that are imported and exported are exempted.
However, digital services provided but foreigners to consumers in Malaysia exceeding RM 500,000 per year will have to register for Service Tax from the start of 1 January 2020.
Sales Tax @ 10%
On any taxable goods and imported taxable goods in Malaysia, a single-stage sales tax is charged by the registered manufacturers. In Malaysia she sales tax charged at 10% is the default sales tax rate.
Zero-rated
The main difference between zero-rated and exempted goods is that the zero-rated are taxable supplies taxed at the SST 0% rate, whereas exempted goods are non-taxable and not subject to SST.
For any listed products as zero-supplies, the company can claim an input tax credit for the materials used to build the supplies. Examples of zero-rated supplies are raw food, sugar, water, and utilities.
Who Pays SST(Sales and Service Tax) in Malaysia?
The businesses that perform their activities in Malaysia and internationally will have to pay SST if they exceed a particular annual income threshold. The current threshold is set at an amount of RM500,000.
The threshold for operators of restaurants, cafes, bars, canteens, or any food and beverage business is subject to RM 1,500,000.
The businesses already registered with the GST don't need to register again for SST(Sales and Service Tax). Their data will be transferred to create the SST Malaysia registration. The overall registration process is straightforward as it is an online procedure.
What Is the Tariff Code?
A tariff code is a code where each product is tagged that is involved in global trading. It is a product-specific code, as stated in the Harmonised System(HS) maintained by the World Customs Organisation(WCO).
For tax purposes, the tariff codes are required on all official shipping documents to ensure a worldwide product classification uniform.
The complete tariff code length is no less than six digits and can be up to ten also. When there are more digits in a tariff code string, the more specific it identifies the product. In the HS (Harmonised System), a series of fewer than six digits is considered a partial tariff code representing a broad category of product or chapter.
Click here to get the Tariff codes as per product classification.
Sales and Service Tax (SST) Rates and Tariff Codes Under Deskera Books
In Deskera Books, while creating a new product, you need to fill in the fields as shown, especially the tariff code, default tax rate if your products are taxable. If your products are non-taxable, indicate the exemption reason.
Users will have to indicate the right tariff code here, and the tax rate will be auto-populated. If you click on the dropdown arrow on the tax rate column, you will see different options such as:
Goods and Person Exempted from Sales Tax
Goods Exempted from Sales Tax
All goods that are manufactured for export will be exempt from sales tax.
Following are the other goods exempted from sales tax:
- Live animals, fish, meat, seafood, milk, eggs, vegetables, fruits, bread.
- Books, magazines, newspapers, journals, and periodicals.
- Bicycles, including certain parts and accessories.
- Naturally occurring mineral substances, chemicals, etc.
- Pharmaceutical products such as medical cream, medicine, medical cream, cough syrup, bandage, medicaments containing multivitamin & minerals, etc
- Fertilizers (animal origin or chemical) and insecticides.
- Articles of goldsmiths such as gold or platinum jewelry, silver tableware, etc.
A detailed list of goods that are not exempted through the Proposed Sales Tax (Goods Exempted From Sales Tax) Order will be charged sales tax at various rates (5% to 10%) prescribed.
Persons Exempted from Sales Tax
Under Malaysia's Sales Tax Exemption Guidelines, persons/manufacturers are exempted from paying sales tax on import and purchasing locally manufactured goods.
The following persons are exempted from Sales Tax:
Schedule A
A person exempted from tax payment Schedule A is the Yang di Pertuan Agong, Ruler of States, Federal or State Government Department, Local Authority, Duty-Free Shops, Public Higher Education Institution, etc.
Schedule B
A person exempted from tax payment under Schedule B is a manufacturer of specific non-taxable goods, tax exemption on the acquisition of raw materials, components, packaging materials, and manufacturing aids to be used solely and directly in manufacturing activities.
Schedule C
A person exempted from tax payment under Schedule C is a registered manufacturer of taxable goods, tax Exempt on acquiring raw materials, components, packaging materials, and manufacturing aids to be used solely and directly to manufacture taxable goods.
Schedule A, Schedule B and Schedule C Exemptions Under Deskera Books
In Deskera Books, you're required to indicate if your business is registered for exemption when you're creating a new organization.
If yes, you'll have to provide the exemption number, expiry date and indicate the exemption criteria that apply to you. Indicating the right exemption criteria enables our system to generate an accurate Report in compliance.
Further SST(Sales and Service Tax) Details
To know about the sales and service tax(SST) regime, please refer to below regulations, orders, and industry guidelines release by RMCD(Royal Malaysian Customs Department):
Sales and Service Tax (SST) Registration in Malaysia
In Malaysia, before applying for the SST(Sales and Service Tax), every business performing its activities must assess if they are subject to this tax. For already GST registered manufacturers, businesses, and service providers, they are automatically identified and registered under the Sales and Service Tax(SST).
These businesses may charge sales and service tax(SST) to their suitable customers. The accountant partner or firm must advise the business if they have failed to register with the Sales and Service Tax (SST) automatically. With this, the business can register itself via the MySST system.
The businesses must meet a few criteria to be liable to register for Sales and Service Tax(SST).
Sales Tax
- The sales tax applies to your business in the manufacturing and import of taxable goods
- A business is liable to pay SST if the total sales value of taxable goods exceeds RM500,000 in the past 12 months
Service tax
- Your business is working under the Service Tax Act 2018 and is a service provider of taxable services.
- In the past 12 months, the total value of your taxable services exceeds the registration threshold, which is RM500,000, with the following exceptions:
Exemption from Registration
Following are the SST exempted business and services providers,
- Manufacturer of non-taxable goods*.
- Manufacturer below threshold
- Sub-contractor manufacturer below the threshold
- Manufacturing activities exempted from registration like Tailoring, Installation incorporation of goods into the building, Jeweler, optician
How to Check SST Registration Status for a Business in Malaysia?
To check whether your business is registered with the SST is quite simple.
Here is the step by step guide to check SST status,
Step 1: Firstly, you need to visit its official MySSTwebsite.(https: //www.mysst.customs.gov.my/).
Then click on the "Registration Status" tab, which will open a new page.
Step 2: Click on the "please select" button. With this, you will be provided with different options. Just choose the options from the dropdown list.
Step 3: Lastly, enter the name of your business registration number and hit the submit button.
Following these simple steps, you can easily find your SST Number and check if you are already registered with the SST through the MySST web portal.
Sales and Service Tax Registration Number Under Deskera Books
With Deskera Books, you have an option to enter your SST registration number when creating your organization.
In the compliance section, when creating a new company, you're required to enter your business registration number, the sales tax registration number, or service tax registration number.
Indicate if your company is eligible for the exemption, and lastly, select the exemption reason. Save the record of the company details.
What Are the Responsibilities of the Registered Person?
Responsibilities of the registered person include:
(i). Charge service tax on their taxable service
(ii). Issue invoices in the national language or English language.
(iii). Submit SST-02 returns and payment.
(iv). Keep adequate records for seven (7) years from the latest date to which the records relate.
How Can I Register for Sales and Service Tax In Malaysia?
Suppose your business is eligible to register for Sales and Service Tax(SST); you are required to complete the Sales Tax registration process or Service Tax registration process respectively through the online portal on the MySST website.
From the concerned authorities, these business owners will receive a letter/email notifying them that they are now liable to pay under the SST(Sales and Service Tax) system. The Malaysia SST registration or application process is carried out online via the MySST portal.
The application processed through this system for GST registrants is auto-approved within 24 hours. However, it may also take longer than expected if the system is required some verification for completing the registration process.
The business can apply for voluntary registration, even if it is exempt from the Sales and Service Tax(SST). These businesses should be manufacturing taxable goods, and their annual income shall stay below the taxable income threshold.
The SST registration due date will be the last day of the month, following the month in which the total sales amount has exceeded or is expected to exceed the threshold.
For Example:
Please refer to this video to help you register for SST
SST Deregistration Process in Malaysia
If you would like to deregister your SST business, you can do so by submitting the SST Deregistration request to RMCD(Royal Malaysian Customs Department).
A registered person is required to notify RMCD within 30 days from the date of occurrence if he ceases business or ceases providing taxable services.
A registered person may apply to deregister under the following circumstances :
i). If you have been registered automatically for SST
ii). Your business does not supply taxable goods and services
iii). if your business is not generating any taxable services or is generating an income less than the RM500,000 threshold
You will need to submit a Deregistration request to SST if you would like to close your business.
To apply for the Sales and Service Tax(SST) Deregistration process, you need to provide an authorization letter to the Customs Department.
Following are the documents required for SST Deregistration,
- Your retail photograph
- Documents of SSM incorporation
- Invoice Sample with description
- Special exemption - FZ/LMW
- Audited statements of financial
- Income tax forms of management account - Form C/P/PT/B/M
All documents hard copy must be submitted to the Customs Control station and also emailed to daftarcjcp@customs.gov.my.
*Please note that depending on the Customs Officer in question, this checklist may vary.
Sales and Service Tax (SST) Return Filing in Malaysia
Every registered business will have to file their sales and service tax return at the government portal.
The taxable Period of SST is two calendar months. Hence, the Sales and Service Tax returns are paid every two months, even if there is no tax paid. The SST payment is made from the end of the taxable period within 30 days.
For sales and service tax, the timing to account for the separate transactions is different.
The taxable goods are disposed of, solid, or first used by the taxable person for sales tax.
For service tax, it is when the taxable services rendered payment is received. But within 12 months, if the payment for service is not received from the date of invoice issuance, the tax will be due on the day immediately after the expiry of the 12 months.
Please note two different taxable periods under your sales and service tax registration according to your FYE month; they can be odd FYE month or even FYE month.
A) ODD FYE Month= First Taxable Period = 1 month
- 1st Taxable Period = 1st to 30 September 2018 (One month)
- 2nd taxable Period = 1 October 2018 to 30 November (Two months)
- 2rd Taxable Period= 1 December 2018 -31 January 2019 (Two months)
B) EVEN FYE Months – 1st – First Taxable Period = 2 month
- 1st Taxable period = 1 September to 31 October 2018 (Two months)
- 2nd Taxable period = 1 November to 31 December 2018 (Two months) and so on.
How to File the Sales and Service Tax (SST) Return?
There are two ways to file the SST return:
- You need to submit your Tax Return online via the CJP system. After the return submission in the same portal, the payment is made via FPX facility with 17 banks to choose from
- Alternatively, you can download Form SST-02 from the MySST portal and mail it to CPC(Customs Processing Centre) by post. The payment can be made by bank draft/cheque in the name of Ketua Pengarah Kastam Malaysia.
The address to is as follows:
Jabatan Kastam Diraja Malaysia Pusat Pemprosesan Kastam Kompleks Kastam Kelana
Jaya No.22,Jalan SS6/3,
Kelana Jaya,
47301 Petaling Jaya,
Selangor
Payment of SST (Sales and Service Tax)
As same as the filing of SST return, there are two ways to make the SST payment:
- You can do it online via the FPX system of the CJP system
However, for payment of taxes online, there is an allowable payment limit for online transactions:
i) For corporate bank account payments (B2B), the amount is RM100 million.
ii) For individual bank account payments (B2C), the amount is RM100,000.
A partial payment can be made by cheque or bank draft and posted to the Customs Processing Center (CPC).
- Also, the payment can be made by cheque, bank draft in the name of 'Ketua Pengarah Kastam Malaysia' and mail it to the Customs Processing Centre (CPC)
Additional Read: User Manual for Online Return and Payment Submission
What Are the Possible Sales and Service Tax (SST) Penalties?
Penalties are imposed for the following offenses:
Failure to File SST Returns
For not filing SST returns, the taxable person is fined for
- a maximum fine of RM50,000,
- imprisoned for a maximum of three years, or both.
Failure to Make SST Payment
For not making SST payment, the taxable person is fined for
- a maximum fine of RM50,000,
- imprisoned for a maximum of three years, or both.
Please note that the failure to make SST payments and failure to make SST returns are two separate and distinct offenses.
Late Payment Penalty
Please note the date when you should file your sales tax as a penalty will be charged to you for late payment.
The below table shows the rate of penalty charged for different ranges of late payments.
Evasion of tax
- For the first offense, the taxable person can be fined of the sales tax amount, with a minimum of ten times and a maximum of twenty times, imprisoned for five years, or both.
- For the second offense, the taxable person can be fined of the sales tax amount, with a minimum of twenty times and a maximum of forty times the Sales Tax amount, imprisoned for seven years, or both.
.
Malaysia SST(Sales and Service Tax) Tax Reports Available Under Deskera Books
Using Deskera Books, you are able to generate below Tax reports for Malaysia
SST02 Report:
If you are a registered taxable person in Malaysia, you are required to prepare and file the SST-02 Report.
Using Deskera Books, you can view this report, go to the Report tab on the sidebar menu, and select the SST-02 Report under the Tax section.
SST02 Report - Part B1
Under section B1, you’ll come across the invoice document number, tariff code of the products, the value of taxable goods sold, the value of goods for own use, and the value of taxable services. The amount in each column is auto-populated based on the invoices you have created in the Sell tab.
Part B2
The line item on Part B2 is auto-populated based on the business activities you have performed on Deskera Books. Below are the explanations of each line item in the SST-02 Report:
Part D: Sales/ Services Exempted From Tax
Line 18: Sales of Taxable Goods Exempted From tax under Sales Tax (Goods Exempted From Sales Tax) Order 2018: The total value of sales tax exempted from tax in the Export/Special Area/ Designated Area and local sales exempted under Schedule A, B, and C.
Part E: Purchase Under Schedule C, Sales Tax (Person Exempted From Payment of Sales Tax) Order 2018
- Line 19 - Item 1 and Item 2 (Purchase / Importation of Raw Material Exempted from Sales Tax): The amount of purchase and importation of raw material exempted from sales tax in Malaysian currency (RM).
- Line 20 - Item 3 and Item 4 (Purchase/ Importation of Raw Material on behalf Registered Manufacturer Exempted from Sales Tax): The amount of purchase and importation on behalf of registered manufacturer exempted from sales tax in Malaysian currency (RM).
- Line 21 - Item 5: The value of work performed exempted from the sales tax in Malaysian currency (RM).
Part F
Under Section F, fill in the details as stated below:
- Date of Declaration
- Name of Declarant
- Identity Card/ Passport Number
- Designation of Declarant
- Telephone Number
Once you have generated the SST-02 Report, you will have to file the report manually by posting it to the Customs Processing Center (CPC) or submit the report via MySST Portal. Do note that the SST-02 Report should be furnished even though there is no tax to be paid (NIL Return).
Sales and Service Tax Return Report
With Deskera Books software, users are not required to prepare the sales and service tax return report manually.
For all the selling activities you have performed in the Sell tab, the data will automatically be mapped to the Sales and Service Tax Return Report.
Once you click on the Sales Tax Return, in this report, you can view the products that are sold to your customers based on the tariff code.
Besides viewing the Sales Tax Return, users can also view the Service Tax Return Report if they're in the service industry. Based on this report, the service type column shows the tariff code of the service they're providing.
Conclusion:
Deskera Books ensures that your SST(Sales and Service Tax) and tax submissions to the Royal Malaysian Customs Department (RMCD) are easy and accurate. You can generate the SST-02 Report effortlessly and ensure correct filling of the report to the Customs Processing Center (CPC) or submitting the report via MySST Portal.
Get your free trial of Deskera Books today!
