What is SST? SST for Manufacturers and Importers
What is SST? SST is Sales and Service Tax, effective from 1st September 2018 to replace the Goods and Services Tax (GST) Act 2014. SST is introduced under Sales Tax Act 2018 and Service Tax Act 2018 along with its respective subsidiary legislation.
The new SST is said to involved less registrants and less taxable items than the previous GST (we will cover an article about this later on). Finance Minister mentioned that the new SST will involve lesser Manufacturers and Importers than GST. Do you need to emphasize so much on the difference? No, you don’t, it’s a different tax regime and you need to move on. If you keep comparing, you will have a hard time really understanding SST when all you have in your mind is SST. Unlearn GST and relearn SST. Instead of comparing with GST, it’s more important to emphasize on the SST for Manufacturers and Importers!
What is the tax rate for SST? What is the tax rate for Sales Tax? What is the tax rate for Service Tax?
In SST era, pay attention to the receipt and you will see sales tax or service tax or no tax on it. Do not expect the word SST in the receipt because if they are liable to charge, it will be either Sales Tax or Service Tax only. The tax rate for Sales Tax is at 0%, 5% or 10% according to the taxable items decided by the Government based on Gazetted Order. You may refer to the full list of taxable items list from this link here (by Royal Malaysians Customs Department). For Service Tax, it is a standard 6% across all industries and companies charging service tax.
Lets start with SST for Manufacturers and Importers- that is Sales Tax! For this article, we are going to talk about the Concept, Mechanism, and Who is subjected to Sales Tax.
What is Sales Tax? SST For Manufactures and Importers
Sales Tax is a single stage consumption tax that is charged and levied on imported and locally manufactured goods either at the time of importation or at the time the goods are sold or otherwise disposed by the registered manufacturer (Sales Tax 2018). Sales Tax is imposed on taxable goods manufactured in Malaysia by any registered manufacturer at the time the goods are sold, disposed of other than sales or used other than as a material in the manufacture of goods. It is also imported goods when the goods are declared, duty paid and released from customs control. However, there are also situations where certain items are not subjected to Sales Tax. For example, if the items fall under Sales Tax Exemption List, then it is not subjected to Sales Tax. Refer to the exempted items in the list here. In addition to that list, there are also certain exemption given by the Minister of Finance and manufacturing activities provided in Designated Area (DA) and Special Area (SA) are not subjected to Sales Tax.
Sales Tax Mechanism- How Does Sales Tax Works?
Unlike GST, Sales Tax is only collected by the Government at the manufacturer’s level. Wholesaler and retailer will not and should not charge or collect sales tax when the consumer purchase. The elements of sales tax is embedded in the price paid by consumer.
How do you define Manufacturing under SST?
Manufacturing is defined as a conversion of materials by manual or mechanical means into a new product by changing the size, shape, composition, nature or quality of such materials and include the assembly of parts into a piece of machinery or other products. For example, manufacturing process of a guitar or printer involves conversion of materials into a finish or semi-finished product is considered manufacturing activities under Sales Tax 2018. However, manufacture does not include the installation of machinery or equipment for the purpose of construction. The machine is complete and no additional materials are used in the new installation and the installation can be done easily and quickly. For example, Company ABC purchased machine and components to be brought and installed in his manufacturing plant. Such process of installation is not subjected to manufacturing definitions under Section 3 of Sales Tax Act 2018.
Subcontractor also falls under the definition of manufacturing under Sales Tax Act 2018. Subcontractors carry out work for another manufacturer as a part of a larger project. The manufacturer supplies raw materials or semi-finished goods to the subcontractor for further work to be done. Upon completion, the manufacturer acquire the goods and this is subjected to sales tax unless an exemption is claimed by the registered Manufacturer under Item 5 Schedule C of the Sales Tax (Person Exempted from Payment of Tax) Order 2018. Registered Manufacturer can apply to appoint subcontractors by submitting an application through MySST Systems or do a manual submission.
Do every company in Manufacturing subjected to Sales Tax? Who are the taxable Person under Sales Tax?
You would have to be manufacturers who manufactures taxable goods with sales value exceeding RM 500,000 within the period of 12 months to be required to be registered pursuant to Section 12 Sales Tax Act 2018.
If you are manufacturers who carry out business as subcontractor and the total labor charge of the subcontractor works exceeds RM 500,000 within 12 months.
What happens if i am a manufacturers who manufacture taxable goods but my sales value does not exceed RM 500,000? Do I have to register? No, it is not mandatory under the Act but you can choose to register on a voluntary basis under Section 14 of the Sales Tax Act 2018. This will allow you to enjoy the facilities given under the Act.
How do you know if you should register under Sales Tax or Service Tax? Or are you still unsure if manufacturer like you should register for SST? You probably still have not grasp the full understanding of what is SST.
If you wish to attend to SST training to understand more about what is SST, you may attend to an intensive 20 pax SST workshop on 27th September 2018 conducted by experience SST and GST consultants. For more information about the SST Seminar, click here