Malaysia Sales and Services Tax (SST)
Sales tax is only imposed on one level of production, which normally happens at the output level when goods are being taken out from the factory.
Service tax is imposed on certain services when offered to the consumer.
Malaysia Goods and Services Tax (GST) replaced the Government Sales Tax and the Service Tax on 1 April 2015.
Malaysian Tax History
In Malaysia, our tax system involves several different indirect taxes:
- Import duty on goods brought into the country.
- Export duty on goods produced for sale outside the country.
- Government Sales Tax on a wide range of goods at the point of import or at the manufacturer’s level, with four tax rates at 5%, 10%, 20% and 25%.
- Service Tax on services provided by restaurants, hotels, telecommunications services, professional services by architects, engineers, lawyers etc.
- Excise Duty on luxury and ‘sin’ products such as automobiles, liquor, beer and tobacco products.
Previous Consumption Tax
a) SALES TAX
Sales Tax was introduced on the 29th February 1972 as a single stage consumption tax, levied, charged and paid on goods manufactured in Malaysia and imported.
Currently, the rates of sales tax are as follows:
- Reduced rate of 5% for non-essential foodstuff and building materials
- A general rate of 10%
- Specific rates for petroleum products
Manufacturers of taxable goods whose annual sales turnover exceed RM100,000 is required to be licensed under sales tax act. Those with annual sales turnover does not exceed RM100,000 are required to apply for a certificate of exemption from licensing.
Scope of Tax
Sales tax is levied on locally manufactured goods at the time the goods are sold or otherwise disposed of by the manufacturer. It is called a single stage tax because sales tax is to be charged once only, either at the input or at the output stage.
- List of goods subject to sales tax at 10%
- List of goods subject to sales tax at 5%
b) SERVICE TAX
Service tax was introduced on the 1st March 1975 as a single stage consumption tax, levied, charged and paid on specific services provided by a taxable person in Malaysia.
Currently, the rates of service tax are as follows:
- Flat rate of 5%;
- Specific rates for credit card – RM50.00 (effective from 1st January 2010)
Any person who carries on business of providing taxable services in any prescribed establishment is required to be licensed under the service tax act. Licensing is based on the following threshold:
|Threshold Level||Taxable Services|
|No Threshold||a. Hotel of having more than 25 rooms (Group A)|
b. Restaurant, Bar, Snack-Bar, Coffee Houses located in hotel having more than 25 rooms (Group B1)
c. Night-Clubs, Dance Hall, Cabarets, Health Centre, Massage Parlours, Public Houses and Beer Houses (Group D)
d. Provision of insurance services to business organisation
e. Provision of telecommunication services
f. Provision of services for the clearing of goods from customs control
g. Provision of accounting services by the Public Accountant
h. Provision of legal services by the Legal Firms
i. Provision of engineering services by the Professional Engineers
j. Provision of architecture services by the Architect
k. Provision of surveying services by the surveyor
l. Provision of Consultancy services by the Consultant Companies
m. Provision of management services by Management Companies
n. Provision of credit card or charge card services
|Annual Sale Turnover of RM 150,000 and above||Services provided by Professional under Group G as follows:-|
a. Provision of parking spaces for motor vehicles
b. Provision of courier delivery services
c. Provision of motor vehicles service and repair centres by the Workshop
d. Provision of security guard or body-guards services by the Private Agency
e. Provision of employment services by the Employment Agency
|Annual Sale Turnover of RM300,000 and above||a. Restaurants, Bar, Snack-Bars, Coffee Houses located in the Hotel having 25 rooms and less (Group B2)|
b. Services provided by Private Clubs including golf clubs (Group E)
c. Services provided by Private Hospitals (Group F)
d. Services provided by operators of hire-an-drive or hire-car companies (Group G)
e. Services provided by advertising agency (Group G)
|Annual Sale Turnover of RM3,000,000 and above (effective from 1stJuly 2008)||Restaurants, Bar, Snack-Bars, Coffee Houses located outside the Hotel including food courts (Group C)|
Scope of Tax
Service tax is charged and levied on selected taxable services as prescribed in the Second Schedule of the Service Tax Regulations 1975.
List of prescribed services subject to service tax at 5%