Malaysia to Re-Introduce Sales and Services Tax from September 1

On September 1, 2018, Malaysia will re-introduce the Sales and Services Tax (SST), replacing the three-year-old Goods and Services Tax (GST).

Earlier this year, the new government led by Prime Minister Mahathir Bin Mohamad had lowered the six percent GST to zero percent, effectively removing it for consumers throughout the country. 

Proposed SST and exemptions

Under the new tax system, services will be taxed at six percent while the sale of goods will incur a five to 10 percent tax.  

According to the proposed framework on SST, the sales tax will be charged on taxable goods that are manufactured in, or imported into, Malaysia. Manufactured items exported from the country will not be subject to sales tax. Further, to maintain the single-stage principle under SST, manufacturers will be eligible for exemption on sales tax paid on their raw materials and other inputs for production.

Among the items that will not be taxed are live animals, daily food items like milk, cream, rice, certain vegetables, cooking oil and bread, essential goods such as newspapers and sanitary pads, and vehicles including bicycles, carriages for disabled persons, and motorcycles below 250cc.

With regards to services, the tax will be levied on specific prescribed services provided by a taxable individual carrying out business in Malaysia.  Service tax will not be charged on exported or imported services. The list of specific prescribed services includes hotels and homestay operators, restaurants, telecommunications, professional and consultancy services, gaming, credit cards, domestic flights, information technology services and electricity.

Private hospitals and domestic flights, except for rural air services, will not be taxed under SST.

Registration

For businesses with an annual turnover exceeding RM500,000, the registration for the proposed SST must be done online through MySST system, within a 12-month period starting from September 1.

Those already registered under the GST system will be automatically registered under the MySST system. Business may apply for the voluntary registration regime provided they manufacture taxable goods and do not meet the annual turnover threshold.

There is no group registration available under the new SST regime.

Filing sales tax returns

Under the SST, the registered businesses will be required to file tax returns on a bi-monthly basis. The return must be filed no later than the last day of the month following the taxable period. The penalty for late returns is given below

• 10 percent on first 30 days period.
• 15 percent on the second 30 days period.
• 15 percent on third 30 days period.
• A maximum penalty of 40 percent after 90 days.

The due date for filing first returns is November 30, 2018, for the taxable period from September to October, 2018. Businesses may file the returns either manually, that is by post to SST processing centre, or electronically through the online MySST portal.  

 

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