Understanding Malaysia's Sales and Service Tax (SST)
Apr 23, 2024
Malaysia’s Sales and Service Tax (SST), similar to a value-added tax (VAT), is an important component of government revenue in Malaysia. In this article, we will cover an overview of SST in Malaysia, the transition from GST to SST, the rates, exclusions, and the process for registration and filing.
What is a Sales and Service Tax?
A sales and service tax is a tax imposed on goods and services at the provider level, whether a goods manufacturer or a service provider. The tax is paid at a single stage, typically at purchase by the end consumer.
The SST consists of two key components:
Sales Tax: A single-stage tax levied on goods manufactured and produced within Malaysia, as well as on taxable imported items entering the country.
Service Tax: A consumption tax imposed on taxable services offered within Malaysia by registered service providers conducting their business operations.
The Sales and Service Tax (SST), an indirect sales tax, was reintroduced in Malaysia on September 1, 2018, succeeding the 6% Goods and Services Tax (GST). The Royal Malaysian Customs Department (RMCD) oversees the administration of SST.
The transition from GST to SST in Malaysia
Malaysia had a goods and services tax at a standard rate of 6% from April 2015 to 1st June 2018.
A tax holiday was declared on 1 June 2018, and the GST rates were reduced from 6% to 0%, marking the transition from GST to SST.
The SST was officially implemented on 1st September 2018.
How does SST work in Malaysia?
The sales and services tax consists of two key components:
Sales tax:
The sales tax element applies to locally manufactured and produced goods, as well as taxable imports entering Malaysia.
Consumers are taxed based on the acquisition cost of specific goods and services. Sales tax is levied at a single point in the supply chain, either during the sale or disposal of the goods.
Malaysia's sales tax rate varies between 5% to 10% depending on the category of goods.
If your business has generated over RM 500,000 in total sales value from taxable goods within the last 12 months, you are obligated to pay SST.
What goods are taxable in Malaysia?
Taxable goods under sales tax refer to goods produced and imported into Malaysia. These goods include:
Articles of plastic, rubber, and leather
Bird’s Nest and honey
Cosmetics and perfume
Edible preparations
Fat and oil
Fruit juice
Furniture
Glue
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
Watches
What are the goods exempted from tax in Malaysia?
Any goods that are manufactured for export are exempt from tax. Goods that are specially exempted include:
Books, magazines, newspapers and journals
Cereals
Coffee and tea
Fertilizers
Goods manufactured for export
Insecticides and disinfectant
Live animals, fish, seafood, and eggs
Meat and edible meat offal
Pharmaceutical products
Spices
Wood pulp and waste of paper
Which persons and manufacturers are exempted from sales tax?
Yang di Pertuan Agong (the King)
The head of state
Federal or state government departments
Importers
Some local government authorities
Malaysian Armed Forces
Duty-free shops
Public higher education institutions
Manufacturers approved by the Director-General
Manufacturers 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.
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 the manufacturing of taxable goods.
What are the sales tax rates in Malaysia?
Sales tax rates play a crucial role in determining the final price of goods and services. In Malaysia, these rates vary depending on the type of goods:
5% tax rate: Applicable to essential items such as basic foodstuffs, construction materials, fruit juices, personal computers, mobile phones, and watches.
10% tax rate: Covers most other goods, except for petroleum (which has specific rates) and tax-exempt items.
A detailed list of the taxable goods tax rates can be read here.
Services tax:
In Malaysia, a service tax is a consumption tax imposed on taxable services provided by registered businesses. Business owners must be aware of the service tax rate and the prescribed thresholds to ensure compliance:
Service tax rate: The standard rate for service tax in Malaysia is 6%.
Thresholds: Businesses are required to pay SST if their total value of taxable services within 12 months exceeds the prescribed threshold.
Generally, the threshold is RM 500,000, with some exceptions. For instance, the threshold for operators of restaurants and cafes is RM 1.5 million.
What services are taxable in Malaysia?
Accommodation (hotels, etc.)
Food and beverage
Night clubs, dance halls, cabarets, health and wellness centers, massage parlors, public houses, and beer houses
Credit card and charge card services
Professional services: legal services, accounting, auditing, bookkeeping, and consultancy, surveying services, engineering consultancy, architectural services, consultancy services, information technology services, management services, and employment services.
Private clubs
Golf clubs and driving ranges
Casinos and gambling houses
Other service providers: advertising services, brokerage 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 goods from customs control, servicing and repair of motor vehicles, subscription broadcasting services, telecommunication services, theme parks.
What are the service tax rates in Malaysia?
The standard rate for service tax in Malaysia is 6% and applies to all taxable services. Services that are imported or exported are exempted from service tax.
You can view complete lists of exempted goods, services, and persons on the MySST website.
When should I register my business for sales and services tax in Malaysia?
A business must register for SST if the total amount of taxable services/goods provided in 12 months exceeds the threshold.
Consider the following conditions to determine your eligibility:
Sales Tax
Your business is engaged in the manufacturing of taxable goods.
The total sales value of your business has exceeded RM 500,000 in the past 12 months.
Service Tax
Your business provides taxable services.
The total value of taxable services within 12 months surpasses the prescribed threshold, typically RM 500,000, although certain services may have a different threshold.
How to register for sales and service tax in Malaysia?
Malaysia’s SST registration process is fully online. You can register for Sales Tax and Service Tax in Malaysia through the MySST website.
The process can vary in length, but sticking to the process and providing clear, accurate documentation with your application is the best way to guarantee a quick turnaround.
Registration Due Date: Ensure you submit your application by the last day of the month following the month in which your business's total sales of taxable goods or services surpass the prescribed threshold. For instance, if your total sales exceed the threshold on May 31, the deadline to apply for SST registration would be June 30.
Businesses that are exempt from SST must still complete an exemption application through the MySST website.
Do foreign companies need to register for SST in Malaysia?
Foreign companies without a permanent establishment in Malaysia are generally not required to register for sales tax or service tax.
It's important to note that voluntary registration is also not an option for such foreign companies. To determine if your foreign business has any specific tax obligations in Malaysia, consult with a professional tax advisor or review the official guidelines provided by the Royal Malaysian Customs Department.
By understanding your company's status and responsibilities, you can ensure compliance with Malaysian tax regulations.
When do businesses have to file SST in Malaysia?
In Malaysia, the taxable period for Sales and Service Tax (SST) returns is every two months. It is important to file your SST returns even if no tax is due. Adhere to the following guidelines for timely filing and payments:
Filing Frequency: Submit your SST returns every two months, regardless of whether any tax is payable.
Payment Deadline: Make your SST payments within 30 days from the end of the taxable period to avoid penalties.
Filing Methods: Utilize the online Customs Joint Portal (CJP) system or download Form SST-02 from the MySST portal and submit it via mail to the Customs Processing Centre (CPC).
Click here to access the online Customs Joint Portal (CJP) system
What is the GST rate in Malaysia?
There is no GST in Malaysia. SST replaced GST in 2018. Businesses must charge Sales and services tax instead, the rates range between 5% to 10% for sales and 6% for services.
A detailed list of the taxable goods tax rates can be read here.
What is the penalty for not filing SST in Malaysia?
There are four potential issues with SST in Malaysia: failure to file, failure to pay, late payment, and SST avoidance.
Failure to file SST in Malaysia
Penalty: A maximum fine of RM 50,000, maximum imprisonment of three years, or both
Failure to pay the SST collected to authorities in Malaysia
A maximum fine of RM 50,000, maximum imprisonment of three years, or both.
Late payment of SST in Malaysia
First 30 days: A 10% charge is imposed on the outstanding SST amount.
Next 30 days: An additional 15% charge is imposed on the outstanding amount.
Following 30 days: Another 15% charge is levied on the outstanding amount.
Evading SST in Malaysia
First Offence: A minimum fine of 10 times and a maximum of 20 times the sales tax amount, a maximum imprisonment term of five years, or both.
Second Offence: A minimum fine of 20 times and a maximum of 40 times the sales tax amount, a maximum imprisonment term of seven years, or both.
Want to avoid these penalties? Maintain Malaysian SST in Compliance with Commenda:
