Sales and Service Tax

Overview of SST

The proposed taxes are conceptually a re-introduction of the Sales Tax and Service Tax that existed prior to the introduction of GST, but with some changes in its scope and also its administrative and compliance aspects.

 

Below is a brief conceptual overview of two proposed taxes.

Service Tax

Scope

All taxable services made in the course or furtherance of any business in Malaysia.

Who is impacted?
  • Companies whose value of taxable services (for a period of 12 months):
    • exceeds a threshold of RM500,000
    • registered

OR

    • liable to be registered, under the Service Tax Act 2018
Proposed Service Tax Framework
Registration
  • Mandatory (where applicable) or Voluntary (branch/division level)
Transitional registration
  • The following who meet the criteria below will be automatically registered for service Tax:
    • Service providers who are GST-registered persons;
    • Making supplies of taxable services;
    • Who meet the criteria
Rate of tax
  • 6%
  • A specific rate for credit cards (RM25)
Return submission and payment
  • Bi-monthly
  • Electronically or by post
Taxable services
  • Hotels
  • Restaurants
  • Gaming
  • Telecommunications
  • Professional
  • Consultancy services
  • Motor Vehicle repair
  • Credit cards
  • Domestic Flights
  • IT services
  • Electricity
Contra system
  • A registered person is allowed to deduct Service Tax in his return for any cancellation and/or termination of services or any other reasons such as reducing premiums or giving discounts.
Exemption
  • No exemption
  • The Minister has the power to grant exemption(s) to any persona subject to Service Tax

Sales Tax

Scope

Unless listed under Proposed Sales Tax Exemption,

  • All taxable goods manufactured and sold, used or disposed by a taxable person in Malaysia

And

  • Taxable goods imported into Malaysia
Who is impacted?
  • Companies whose value of taxable services (for a period of 12 months):
    • exceeds a threshold of RM500,000
    • registered

OR

    • liable to be registered, under the Service Tax Act 2018
Proposed Service Tax Framework
Registration
  • Mandatory (where applicable) or Voluntary
Transitional registration
  • The following who meet the criteria below will be automatically registered for service Tax:
    • Manufacturers who are GST-registered persons;
    • Who meet the criteria
Rate of tax
  • 5%
  • 10%

Or

  • A specific rate for credit cards (RM25)
Return submission and payment
  • Bi-monthly
  • Electronically or by post
Late Payment Penalty
  • 10% (First 30-day period)
  • 15% (Second 30-day period)
  • 15% (Third 30-day period)

*Maximum penalty: 40% after 90 days*

Exemption from Sales Tax
  1.  Goods listed under the Proposed Sales Tax (Goods Exempted from Sales Tax) Order 2018
  2.  Persons listed under the Proposed Sales Tax (Persons Exempted from Sales Tax) Order 2018
  3.  Sales Tax (Exemption from Registration) Order 2018
Accounting Basis
  • Sales Tax is required to be accounted for the time when the goods are sold, disposed of or first used (accrual basis).

Penalties under the new regime

Sales Tax Bill 2018

 

First Time Offender
  • Liable to a fine of 10 to 20 times the amount of Sales Tax evaded
  • Maximum of jail: 5 years
  • OR Both
  • Fine: between RM50,000 and RM500,000  (if the exact amount of Sales Tax evaded could not be determined)

 

Second / Subsequent offence
  • Liable to a fine of 20-40 times the amount of Sales Tax evaded
  • Maximum of jail: 7 years
  • OR Both
  • Fine: between RM50,000 and RM500,000  (if the exact amount of Sales Tax evaded could not be determined)
Abetting
  • Liable to a fine of between RM2,000 and RM20,000
  • Maximum of jail: 3 years
  • OR Both