Foundingbird logo

10 common questions about SST answered for business owners

Contents

As one of the fundamental taxes, SST is applicable to many businesses that provide taxable goods and services to customers. Learn more about SST via this FAQ.

What is SST?

Implemented since September 2018, SST has replaced Goods and Services Tax (GST) in Malaysia. 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 on their business.

What are taxable goods and services?

The following 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

Taxable goods refer to all goods manufactured in or imported to Malaysia with a few exemptions as stated in 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 lists can be found on the SST Orders page of the MySST website. These are some examples of goods exempted from Sales Tax:

  • Live animals, fish, seafood and certain essential food items including meat, milk, eggs, vegetables, fruits, bread, etc.
  • Books, magazines, newspapers, journals, and 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, jeweller, optician, etc.

Taxable services

Taxable services are any services listed in the First Schedule of the Service Tax Regulations 2018, which are divided into Group 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 centres, massage parlours, 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

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 which is also SST registered. The accounting services received by the law firm is exempted from the SST.

Who is a taxable person?

A 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 being exempted from the SST registration may apply voluntarily to the Director General (DG) of Customs to register for SST.

Is my business liable to register for SST?

To be liable to register for SST, there are a few criteria to be met by businesses:

Sales tax

  • Business is in the manufacturing industry for taxable goods.
  • The total sales value of taxable goods in the past 12 months exceeds RM500,000.

Service tax

  • Business is a service provider of taxable services.
  • The total value of your taxable services in the past 12 months exceeds the registration threshold which is usually RM500,000, with the following exceptions:
Taxable service providerThreshold
Operators of restaurants, bars, snack-bars, canteen, coffee house or any place providing food and drinks whether eat-in or take-awayRM1,500,000
Persons who are regulated by Bank Negara Malaysia and provide credit card or charge card servicesNo threshold
Approved customs agentsNo threshold

What are the rates of SST?

SST is an ad-valorem tax that is calculated through percentage, in proportion to the estimated value of the sales or services.

Sales Tax

  • 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.

Service Tax

  • 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.

How to register?

If your business is liable to register for SST, you may complete the Sales Tax registration or Service Tax registration respectively online at the MySST website. The due date for registration will be the last day of the month following the month in which the total sales value exceeded or is expected to exceed the threshold.

Here is an example:

  • 29 February 2020 – Total sales value of taxable goods or services exceed the threshold
  • 31 March 2020 – Last day to apply for registration
  • 1 April 2020 – Effective date of registration

If your business is exempted from Sales Tax under Sales Tax (Persons Exempted from Payment of Tax) Order 2018, an application should be made through the MySST website as well.

When should I file the SST return and make payment?

The taxable period of SST is a period of 2 calendar months. Hence, SST return must be filed every 2 months even if there is no tax to be paid. The SST payment should be done within 30 days from the end of the taxable period.

The timing to account for the respective transactions are different for Sales tax and Services tax:

  • For sales tax, it is when the taxable goods are sold, disposed of or first used by the taxable person
  • For service tax, it is when payment is received for the taxable services rendered. But if payment for the service is not received within 12 months from the date of invoice issuance, the tax is due on the day immediately after the expiry of the 12-month period.

Do note that the length of your first taxable period is determined based on whether your financial year-end month falls on odd or even month.

How to file the SST return?

There are 2 ways to file the SST return:

  • Do it online through the CJP system.
  • Download the Form SST-02 from the MySST portal and mail it to the Customs Processing Centre by post. The address is as follow: Jabatan Kastam Diraja Malaysia Pusat Pemprosesan Kastam Kompleks Kastam Kelana Jaya No.22 Jalan SS6/3, Kelana Jaya, 47301 Petaling Jaya, Selangor.

How to pay SST?

Similar to the filing of SST return, there are 2 ways to make the SST payment:

  • Do it online through the FPX system of the CJP system. However, there is an allowable payment limit for online transactions, i.e. RM100 million for corporate bank account and RM100,000 for individual bank account. The remaining payment can be made by issuance of cheque or bank draft and mail it to the Customs Processing Center (CPC).
  • Do it through cheque or bank draft made payable to 'Ketua Pengarah Kastam Malaysia' and mail it to the CPC.

What are the possible penalties?

Penalties will be imposed for the following offences:

Failure or late to register for SST

The business will be expected to pay the SST out of their own pocket as the SST can no longer be collected from the customers.

Failure to make SST return

Upon conviction, the fine and penalties are as follows:

  • Fine ≤ RM50,000
  • Imprisonment ≤ 3 years
  • Both

Failure to make SST payment

Do note that failure to make SST payment and failure to make SST return are 2 separate and distinct offences. Upon conviction, the fine and penalties are as follows:

  • Fine ≤ RM50,000
  • Imprisonment ≤ 3 years
  • Both

Late payment penalty

Upon expiration of 1 month from the taxable period, 10% is imposed on any outstanding SST for the first 30 days. Thereafter, for the second 30-day period, an additional 15% is imposed on any outstanding SST and for the third 30-day period, an additional 15%.

Evasion of tax

For the first offence,

  • Fine with a minimum of 10 times and a maximum of 20 times of the Sales Tax amount
  • Imprisonment ≤ 5 years
  • Both

For the second offence,

  • Fine with minimum 20 times and maximum 40 times of the Sales Tax amount
  • Imprisonment ≤ 7 years
  • Both

-------

Special thanks to Wei Khee who helps out with the content of this article.

Disclaimer: Information provided in this article is for general reference only. It may not be applicable for East Malaysia. Please seek advice from company secretary, lawyer or other professionals according to your business's needs.