A Comprehensive Guide to the New Sales and Service Tax Legislation in Malaysia

On September 1, 2018, Malaysia re-introduced the Sales and Services Tax (SST) to replace the Goods and Services Tax (GST), which had only been operational for three years. Consequently, certain types of businesses (manufacturers and specific service providers) are now required to adjust to the new tax policy.

According to the policy, manufacturers and particular service providers with an annual turnover exceeding $121,000 will be required to pay a tax of 5%-10% and 6%, respectively. While all authorized manufacturers who make over MR 507,062.60 per annum have been affected by the SST, only a group of registered services that generate annual revenues exceeding the above amount have become subject to the new tax legislation. Some of these services include security, legal, accounting, hotel, gaming, architectural and telecommunication.

According to the legislation, businesses have to declare their sales and service tax return every 2 months in accordance with the taxable period. An SST return must be submitted no later than the last day of the following month after the taxable period has come to an end.

SST VS GST

The new SST Malaysia tax law is so similar to its GST (Goods & services tax) predecessor that some experts refer to it as the GST 2.0. For example, it targets manufacturers and specific service providers just as the GST did. In addition, the SST policy demands between 5%-10% tax from the affected manufacturers and 6% tax from the affected services. This can be seen as a very minor deviation from the GST tax law, which demanded a 6% flat rate levy from all affected manufacturers and service providers.

This new sales tax Malaysia policy is however more favorable than the previous one because it has exempted over five thousand businesses, which previously had to pay GST. As a result, the exempted businesses have lowered their prices, making their goods or services affordable to many.

Another significant advantage the SST policy has brought is the creation of new businesses and employment opportunities. Many businesses have been started to take advantage of the generous tax exemption. Some SST exempted businesses, which were previously not excused from GST include; pharmaceutical, tampons & sanitary pads, as well as exercise books manufacturing.

The SST Registration & Return Submission Process

The first part of the sales & service tax return submission process is registration. Businesses that were previously registered on the GST system will automatically be registered on the new sales tax Malaysia system, though.

To register your business, go to the tax department portal, which is https://mysst.customs.gov.my/. Then point your mouse on the "New Registration" tab and choose between sales tax and business tax. Fill out the form and click "submit". After the registration process, you will receive a confirmation message informing you that your your business has been successfully registered.

Once your business is SST registered successfully, you must file and submit your tax return by the last day of the month subsequent to the reporting period, using form SST-02. Go to https://mysst.customs.gov.my/ to fill out the form and submit your tax return electronically. NB.

Returns can also be turned in through the post office. Payments for any due sales and service tax, which should be received by the filing deadline, can be made through check, banker's draft or bank transfer. Cash payments are, however, forbidden.

Final Thoughts

The new SSTMalaysia tax legislation has been a welcomed move by the public. Unlike its predecessor, which saw many businesses struggle to pay taxes, resulting in an increase in the general price of commodities and services, this legislation has only affected certain categories of businesses. The results are; reduced prices of commodities & services, and the set up of more new businesses, hence improving the economy.