Effective 1 September 2018, the Sales Tax Act 2018 and the Service Tax Act 2018, together with its respective subsidiary legislations, are introduced to replace the Goods and Service (GST) Act 2014.
Sales Tax is a Single-Stage Tax Charged and Levied:
on taxable goods manufactured in Malaysia by a taxable person and sold by him (including used or disposed of); and
on taxable goods imported into Malaysia.
Sales tax is ad valorem tax, and the applicable rate is 5% and 10% based on the type of taxable item. Specific tax rates are set for petroleum products.
Taxable Goods
Taxable goods mean goods of a class or kind manufactured in Malaysia or imported into Malaysia which is not exempted from sales tax.
Only registered manufacturers shall impose sales tax on manufactured taxable goods.
Goods not listed under the Sales Tax (Goods Exempted From Sales Tax) Order 2018 are subject to sales tax.
Taxable Person
A taxable person is a person who manufactures taxable goods and is liable to be registered if the annual turnover has exceeded the RM500,000.00 threshold.
Such a person is required to be registered under the MySST system.
Definition of Manufacture
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 includes the assembly of parts into a piece of machinery or other products. However, manufacturing does not include the installation of machinery or equipment for the purpose of construction.
Concerning petroleum, any process of separation, purification, conversion, refining and blending.
Sales Tax Registration
Any person who manufactures taxable goods and the sales value of such taxable goods for a period of 12 months and exceeds the threshold of RM500,000 is liable to be registered under the Sales Tax Act 2018.
Any manufacturer is liable to be registered when:
The sales value of taxable goods manufactured exceeds RM500,000 within 12 months;
Wage value for work performed on taxable goods by subcontract manufacturer exceeds RM500,000 within 12 months.
However, a manufacturer with a sales value of taxable goods of RM500,000 and below may apply for voluntary registration, subject to approval by the Director General of Customs.
In determining the liability of a manufacturer to register, the sales value of taxable goods for a period of 12 months is calculated using any one of the two methods as follows:
Historical method
Total sales value of taxable goods in any month and the 11 months immediately preceding that month;
Future method
Total sales value of taxable goods in any current month and expected sales value of 11 months immediately succeeding that month.
Flow Chart 1: Registration - Manufacturer
Responsibilities of the Registered Manufacturer
Responsibilities of the registered manufacturer include:
Charge sales tax on the sale of taxable goods;
Issue sales invoices in the national language or English language;
Submit SST-02 returns and payment;
Keep adequate records for a period of seven (7) years from the latest date to which the records relate.
Exemption From Registration
Three categories of manufacturers are exempted from registration under this Act:
1. Manufacturers who manufacture taxable goods or sub-contractor doing subcontract work of taxable goods but does not exceed the Sale value of taxable goods of RM500,000 as specified in item 1, Schedule A, Sales Tax (Exemption from Registration) Order 2018.
2. Manufacturers of goods that are not subject to sales tax under Sales Tax (Good Exempted from Sales Tax) Order 2018.
Example: Manufacturer of cooking palm oil; wheat flour; rice, and sugar.
3. Manufacturers whose manufacturing operations are any of those specified in Schedule B, Sales Tax (Exemption from registration) Order 2018.
Example: Manufacture of jewellery and goldsmiths wares; installing air conditioners in motor vehicles and ready mixed concrete manufacture.
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