What is SST in Malaysia: Meaning, Exemption List, Rate 2024, Calculation, and More

Grasping the intricacies of the Sales and Services Tax (SST) in Malaysia is indispensable for businesses striving for compliance and decision-making. This blog delves deeply into Malaysia's SST, encompassing its various categories, the 2024 rate, exemptions, and much more, aiming to provide a comprehensive understanding of the SST in Malaysia.

What is Sales and Service Tax?

SST, or Sales and Service Tax, is the major consumption tax that is charged on the sale of goods and services.  

• Since SST is a consumption tax in Malaysia, tax burden is ultimately borne by consumers. This means that businesses are responsible for collecting the tax from consumers as part of the purchase price and remitting it to the government. 
• SST comprises two separate taxes: Sales Tax and Service Tax. Sales Tax is applicable to taxable goods either manufactured in or imported into Malaysia, while Service Tax is levied on specific services provided by businesses in Malaysia. 
• SST is applied at a single stage, either during the manufacturing process or at the point of consumption of goods and services.
• Sales and Services Tax in Malaysia was officially reintroduced on 1 September 2018, replacing the former Goods and Services Tax (GST) system.

Click here to know the difference between GST and SST in Malaysia

Who pays SST in Malaysia?

In Malaysia, the Sales and Services Tax (SST) is  paid by consumers when they purchase goods or services that are subject to the tax. However, businesses are responsible for collecting and remitting the SST to the government.

What are the different types of Malaysia SST rates?

Malaysia's SST regime encompasses different tax rates based on the nature of goods and services. Here's a breakdown of the various Malaysia SST rates:

• Sales Tax at 5%: A spectrum of products falls under a 5% sales tax, including petroleum oils, construction materials, timepieces, and certain foodstuffs.
• Sales Tax at 10%: This rate is the standard sales tax rate in Malaysia, levied on taxable goods and imported taxable goods. The 10% rate is generally applied to luxury items or goods that are not considered essential.
• Service Tax at 8%: Effective from 1 March 2024, the service tax rate is to be increased from 6% to 8% for all services except for food & beverage services, telecommunication services, parking services and logistics services (new taxable services).
• Service tax at 6%: Food & beverage services, telecommunication services, parking services and logistics services (new taxable services)

Zero-rated supplies are taxable supplies taxed at a 0% SST rate, creating a distinction from exempted goods, which are non-taxable and hence, not subjected to Sales and Services Tax in Malaysia.

Which businesses must apply for sales and service tax registration in Malaysia?

Businesses involved in offering taxable goods and services are required to register for Sales and Services Tax in Malaysia, provided they fulfil certain criteria outlined below:

For Sales Tax Registration

• Engaged in the manufacture of taxable goods.
• The total sales value over the preceding 12 months surpasses RM 500,000.

For Service Tax Registration

• Engaged in providing taxable services.
• The cumulative value of taxable services over the last 12 months exceeds the stipulated threshold, typically set at RM 500,000, although certain services may be subject to different thresholds.

The deadline for registration is the last day of the month following the month where sales of taxable goods or services surpass the stipulated threshold.

What goods are exempted from Sales Tax?

Goods created for export purposes are exempt from sales tax in Malaysia, promoting the country's export-oriented industries. Additional categories like perishable goods, printed materials, bicycles, and pharmaceutical products are also exempt from sales tax, reflecting the government's intention to ensure essential goods' affordability and promote healthy living and education.

Sales and Service Tax (SST) Registration in Malaysia

It's important to note that the registration for sales tax and service tax are separate, each with its own submission process. Here are the simplified steps for SST registration in Malaysia:

• Visit the MySST portal, the government website dedicated to SST registration, at www.mysst.customs.gov.my.
• Fill out the recommended registration form with accurate information as requested.
• Upon submission, you will receive an approval letter immediately, confirming the successful completion of the registration process.
• Additionally, you will be assigned a sales tax registration number.
• The system will provide details such as the effective date of registration, as well as the rules and responsibilities that you need to acknowledge.
• The approval confirmation letter will be automatically sent to your registered email address for future reference.

Which businesses must apply for sales and service tax registration in Malaysia?

Businesses involved in offering taxable goods and services are required to register for Sales and Services Tax in Malaysia, provided they fulfil certain criteria outlined below:

For Sales Tax Registration:

• Engaged in the manufacture of taxable goods.
• The total sales value over the preceding 12 months surpasses RM 500,000.

For Service Tax Registration:

• Engaged in providing taxable services.
• The cumulative value of taxable services over the last 12 months exceeds the stipulated threshold, typically set at RM 500,000, although certain services may be subject to different thresholds.

Penalties of SST Dues

Here are the possible penalties tied to Sales and Service Tax (SST) offences in Malaysia:

Non-Submission of SST Returns:

Failing to file SST returns can result in severe penalties for the taxable entity. The penalties include:

• A fine of up to RM50,000,
• A prison term of up to three years,
• Or both the fine and imprisonment.

Non-Payment of SST Dues:

Failure to make the requisite SST payments also carries hefty penalties which encompass:

• A fine amounting to RM50,000,
• Imprisonment for up to three years,
• Or both.

Late Payment Penalties:

Below is a tabulation of the penalty rates charged for varying durations of late payments:

Conclusion

Just like with any fresh introduction, the re-implementation of SST in Malaysia may have its initial hiccups. However, as seen in other nations, overcoming these initial challenges paves the way for a streamlined tax system with clear advantages. Embracing the Sales and Services Tax in Malaysia is essential for businesses to thrive in the Malaysian market.