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Malaysia launches Sales and Service Tax Sep 2018

  • Aug 1, 2018 | Richard Asquith

Malaysia launches Sales and Service Tax Sep 2018

Malaysia has tabled at Parliament the implementation bill for its Sales and Service Tax (SST), which comes into force on 1 September 2018. It is replacing the 6% Goods and Services Tax, suspended on 1 June 2018.

The switch is expected to cost the country an estimated at RM25 billion in lost revenues as only a fraction of the companies registered for GST will be drawn into the SST net.

SST – narrower tax base with less tax payers

SST was originally in place prior to GST’s introduction in April 2015. GST was charged at each point in the production chain – following the OECD VAT model indirect tax regime. It was implemented to help widen and stablise the tax base, and to reduce indirect tax fraud. However, it proved unpopular and its repeal was a manifesto commitment of the newly installed Pakatan Harapan government. In addition, for businesses, claiming input VAT was problematic and limited for small businesses.

It is anticipated that SST will be levied at 10% for goods and 6% for services. Basic foodstuffs, medicines, some capital equipment and chemicals will be exempted according to a list recently published by the Royal Malaysian Customs Department.

The SST registration threshold will be the same as GST, MYR 500,000 sales per annum. It is not clear of the reclaim facility for exporters.

Only approximately 80,000 companies will be obliged to SST register because of the narrower range of taxable products – 6,400 for SST versus 11,200 for GST. This compares to the 472,000 GST payers.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.