When Should Businesses Register for SST
What is SST
Effective from 1 September 2018, Sales Tax Act 2018 and the Service Tax Act 2018 together with its respective subsidiary legislations are introduced to replace the Goods and Service (GST) Act 2014. The SST consists of 2 elements:
Sales tax, a single-stage tax imposed on taxable goods manufactured locally and sold by a registered manufacturer, and on taxable goods imported into Malaysia.
Service tax, a consumption tax levied and charged on any taxable services provided in Malaysia by a registered service provider in carrying out their business.
What are taxable goods and services?
The following listed taxable goods and services are not applicable for goods and services providers under the special areas in Malaysia (including Langkawi Island, Tioman Island, and Labuan Federal Territory).
Taxable goods refer to all goods manufactured in or imported into Malaysia as stated in the Sales Tax (Goods Exempted from Tax) Order 2018, Sales Tax (Exemption from Registration) Order 2018, and Sales Tax (Persons Exempted from Payment of Tax) Order 2018. The complete list can be found here: https://mysst.customs.gov.my/SSTOrders. However, there are some goods exempted from Sales Tax, such as:
Live animals, fish, seafood and certain essential food items including meat, milk, eggs, vegetables, fruits, bread, etc.
Books, magazines, newspapers, journals, periodicals, etc.
Pharmaceutical products such as medicine, medical cream, cough syrup, etc.
All goods manufactured for export.
Manufacturing activities such as tailoring, installation of goods into a building; also those conducted by jewelers, opticians, etc.
Taxable services are any services listed in the First Schedule of the Service Tax Regulations 2018, which are divided into Groups A to I. Digital service tax that is charged upon foreign digital service providers that came into effect on the 1st of January 2020 falls under Group I.
Group A – Accommodation
Group B – Food and beverage
Group C – Night clubs, dance halls, carabets, health and wellness centers, massage parlors, public houses, and beer houses
Group D – Private club
Group E – Golf club and golf driving range
Group F – Betting and gaming
Group G – Professionals
Group H – Credit card and charge card
Group I – Other service providers
There are some services exempted from Service Tax as well. Some services under Groups G and I are exempted for businesses in which both service providers and service users are SST registered and fall under the same Group. For example, a law firm that is SST registered receives accounting services from an accounting firm that is also SST registered. The accounting services received by the law firm are exempted from the SST.
Who is an SST taxable person?
An SST-taxable person is a manufacturer or a service provider who is registered or liable to register for SST. However, any businesses that are not liable to register or are exempted from the SST registration may apply voluntarily to the Director General (DG) of Customs to register for SST.
Is your business liable to register for SST?
To be liable to register for SST, the business needs to meet a few criteria:
Any person who manufactures taxable goods
The sales value of such taxable goods in the past 12 months and exceeds the threshold of RM500,000
Any person who provides taxable services
The sale value of such taxable services in the past 12 months and exceeds the threshold value (usually RM500,000 for liable businesses, and RM1,500,000 for businesses in F&B)
What are the SST rates?
SST is calculated through percentage, in proportion to the estimated value of the sales or services.
5% for fruit juices, basic foodstuffs, building materials, personal computers, telephone, and watches
10% for all other goods, except petroleum subject to specific rates and goods not specifically exempted.
6% for all taxable services except for the provision of charge or credit card services which is RM25 per year on each principal or supplementary card.