On the 19th July 2018, Malaysia Custom's official website has published the suggested SST framework that is going to be implemeneted on 1st September 2018. SST stands for Sales and Service Tax which comprises of two separate tax acts - Sales Tax Act and Service Tax Act.
Any changes as compared to GST?
According to the suggested framework of SST, most of the living necessities, including processed food, imitation and articles of jewellery, cloths and many more will be exempted from being taxed. This means that our basic cost of living will be reduced as compared to when GST was implemented.
On the other hand, big-ticket items such as, vehicles, electrical appliances and luxurious goods will increase in price due to increased of tax rate from GST 6% to SST 10%.
Different from GST, the proposed SST framework only applies to manufacturers and service provider of taxable goods and supply with yearly sales exceeding RM500,000.
Accounting wise, the main different is towards the accounting basis proposed under the service tax act. The service tax will be imposed based on payment while the sales tax is based on accrual. This means service tax will only be charged into a company's account when a payment is made, while the sales tax will be charged into a company's account based on invoice date.
Payment basis will increase service providers company's cash flow as they only have to pay when they've received payment from their customers. Previously, the GST framework requires all tax registered personnel to pay whenever an invoice is issued regardless of whether the payment is received or not.
Something remain the same
Other than possible changes that may occur, taxes imposed to service sector will remain the same. Service sector including securities, hotel, telecommunication, professional and advisory services will be required to pay a 6% tax rate which is the same with GST tax rate on service sector.
Similar to the previous GST framework as well, registration of SST is mandatory for manufacturer and sub-contractor who manufacture taxable goods with yearly turnover sales that reaches the threshold of RM500,000. Those who were previously GST registered and fulfilled the criteria for SST registration will be registered automatically. Same goes to service provider with sales value exceeding RM500,000 in a year.
You can also visit the link below for further information on the suggested new SST framework:
http://www.customs.gov.my/ms/Pages/sst.aspx
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