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When residing and working in Malaysia, you must have heard of the term Sales and Service Tax (SST) or Goods and Service Tax (GST). These terms are much known in corporate world in this country. So, what is this Sales and Service tax (SST) or Goods and Service tax (GST)? How SST VS GST in Malaysia can be evaluated?
SST is a federal consumption taxation policy that falls under Sales Tax Act 1972 in Malaysia. Same goes for the GST, although obsolete shortly after introduction, it is also a taxation policy on most goods and services sold for regular consumptions.
However it was started way before SST in April 2015 and was governed by the Goods and Services Tax Act 2014. Malaysia’s GST was administered by the Royal Malaysian Customs Department. The GST lasted for three years and was later on replaced and transited to the SST policy from 1st September 2018.
So, what makes the difference in between SST and GST in Malaysia? Let us find it out from here onward:
Before you read about the differentiations between these two policies, first you should know why GST got finally obsolete in Malaysia.
As mentioned earlier, the GST was introduced in April 1st 2015 with the goal to implement tax on various consumable services and bring wide range of products under value added services. The initial progression of this policy although seem to be going well with a return of MR 44 billion each year for the nation.
However, the policy was not a popular one, and it was deeply criticized by both the consumers and manufacturers. This is because; The GST caused the rising price of consumables and services in Malaysia. The Goods and Service tax also posed a complexity in administrative sectors.
The reason for this was GST was a multi stage tax policy. The taxation was levied for almost every stage of supply chain process in the nation. However these exempted cost was passed on and conveyed by the consumers. The end result was consumers had to count excess money from their hard earnings.
Let us now see the difference between obsolete GST and SST in Malaysia:
|Sales and Service Tax (SST)||Goods and Service Tax (GST)|
|Tax rate||For manufactured goods: 5%-10%, for taxable service: 6%, No zero rating.||For all goods and services that falls under taxable criteria: 6%. Selected goods and services were zero rated.|
|Stages||Single stage tax system, where tax is levied by only one stage instead of every other stages. Here sales tax is levied on manufacturers only and service tax is levied by the service provider for their provided service.||Multi stage tax process. Tax is levied at every stage of supply chain and ultimately passed on to the consumers.|
|Registration eligibility||It is compulsory for any customer agents’ ad credit card providers to register for this taxation process with a threshold turnover of MR 500000 in a year and 1.5 million within 12months of period for food and beverage manufacturer.||The eligibility for GST implied on service providers whose turnover threshold is RM 500000 in a year.|
|Tax implied on||Only specified taxable goods and services. If any consumables are exempted are also specified as per policy.||All goods and services except of some consumable products which are exempted or not taxable.|
|Tax credit||Supply chain will not be subjected to claim any tax credit||Taxable consumers are subjected to claim tax credit.|
|Schedule of tax return||The SST need to be retuned at bi-monthly schedule.||Taxable period is every month or at quarterly basis.|
|Policy for imported goods and services||No tax is implicable for imported service but sales tax is added on imported consumable goods.||Recipient of the imported consumable goods and services are liable to pay the tax.|
|Registration criteria||No registration is required; however, if turnover exceeds MR100000, license will be issued under Sales tax Act.||Any entity is entitled to register for tax if carries out taxable product supplies|
|Record keeping||It is compulsory to keep copy of the invoices, receipts and other manually written or printed form of records. At least records of last 6 months need to be preserved for evidential purpose during tax return.||It was compulsory to keep full genuine records of any transactions made. Whether liable to taxation or not, the records for past seven years had to be preserved as per policy.|
When you go in depth, you will find that when SST VS GST is considered, there are many other differences too. Those differences lie in administrative and policy development levels. But manufacturers, service providers and consumers are required to follow only those illustrated in the table above.
Although GST is no more active in Malaysia, many individuals went under this taxation policy as per governmental rules implied upon them. When the GST went obsolete and replaced with SST, those individuals are automatically went to the transition from GST status to the SST payers.
Moreover, detail process of transition from GST to SST and more in depth discussions on SST and GST can be found on Sales and Service Tax Malaysia in 2020. The goal is to cut any confusion between SST and GST. In addition with that, if you are a foreign investor started your new commercial venture in Malaysia, this piece of article will surely be helpful for you as long as you got any query regarding SST and GST in Malaysia.