Déjà Vu? Malaysia Reinstitutes a Sales and Service Tax


As of September 1, 2018—after a three-year experiment with a Goods and Services Tax (GST)—Malaysia reinstated a Sales and Service Tax (SST), similar to the SST in place before April 1, 2015.

So . . . what’s changed? Here are some key differences:  

Scope 

GST generally applied to any supply of taxable goods and services made in Malaysia by a taxable person in the course of their business. It also applied to imports, though exports were zero-rated. SST, however, is significantly narrower in scope. It generally applies to registered manufacturers on taxable goods they manufacture and sell, use or dispose of, as well as a number of specified categories of services including accommodation, food and beverages, night clubs, golf clubs, gambling, enumerated professional services, credit card services, and certain types of insurance.  

Taxable Event

GST was a multi-stage tax, applying at every stage in the supply chain, with a deduction scheme to ensure neutrality for businesses. In contrast, SST is a single-stage tax, and therefore less comprehensive.

Rates

Before June 1, 2018, the standard rate of GST in Malaysia was 6% for both goods and services. This rate was reduced to 0% as of June 1, 2018, when consumers effectively enjoyed a holiday from indirect tax. There was no reduced rate, which contributed to administrative simplicity.

The SST is generally levied at a 6 percent rate for taxable services and a 10 percent rate for goods. There are fixed rates for certain credit card services, and oil and gas products, and a 5 percent rate for certain goods, such as some foodstuffs and construction materials.  

Zero rates  

Under the GST regime, certain supplies, such as exports, were zero-rated, meaning that no GST was charged and an input tax credit was allowed for the related GST expense. The SST does not provide for zero rates, though exporters are entitled to some reliefs.

Input tax

Input tax deductions are provided for under GST, but not under the SST, as it is intended to be a single-stage tax.

 

By Lee Hadnum, Editor, and Joanna Norland, Technical Editor, Bloomberg Tax

The Bloomberg Tax VAT Navigator provides detailed coverage of the new Malaysian SST.  To access the VAT Navigator, and further in-depth analysis and expertise, request a free trial of Bloomberg Tax.