SST is the Sales and Service Tax and GST is the Goods and Service Tax. In Malaysia, SST are to replace the current GST framework on 1st September 2018. One of the main difference between the two tax systems is the level that they are implemented. GST is charged on every level in the supply chain while SST is only charged to the manufacturer in a supply chain. Although companies are able to claim back the GST return, GST involves all level in a supply chain. Every company with yearly turnover sales more than RM500,000 will need to be GST registered. However, for SST, it only affects manufacturer level, there’s no SST return available to claim back.
Supplier
In the GST framework, most of the supplier will need to charge GST when supplying materials to others, while some are zero-rated or exempted. But in the newly proposed SST framework, more materials are exempted from being taxed. If the supplier is supplying materials that are SST exempted, they no longer have to charge SST when supplying those non-taxable supply. On the other hand, for those supplier who is supplying taxable materials, they will be an increase in tax rate from GST 6% to SST 5%.
Manufacturer
Manufacturer who is manufacturing non-taxable products (such as insecticides, printer ink, baths, etc), they will be exempted from paying tax on the acquisition of raw materials, components, packaging to be used in the manufacturing activities. Manufacturer who are SST registered will also be exempted from tax on acquisition of raw materials, components, packaging to be used in manufacturing of the taxable goods. This is to ensure that SST is only taxed on one stage in a supply chain. For taxable items, the tax rate will be increased from GST 6% to SST 10%, which may most probably clead to an increase in taxable item prices.
Another area that the newly proposed SST framework will impact is the residential properties developer. These developer will benefit from lower cost of properties construction when the proposed SST is implemented. In the GST framework, residential properties developer are not allowed to claim GST tax return as residential properties are exempted from GST. They need to bear the GST charged on their material as their cost of development, which will inturn, increase housing development costs. Therefore, if there’s no changes to the list of SST exempted items, the cost of housing construction should be reduced, since most of the properties construction materials (i.e. bricks, cements, sand, etc) are exempted from SST.
Further, the Royal Custom of Malaysia also stated that those who satisfied the SST requirement and are GST registered will be automatically registered for SST.
Retailers
Because Sales Tax is only applicable on manufacturer and service provider level, retailers are generally not under the coverage of SST unless they are providing taxable services that have turnover sales that’s more than RM500,000. Voluntary registration for retailers are therefore, not available, unless they are also service provider. Taxable services includes accounting, lawyer, engineering, architecture, hotels and etc. Such services are liable to pay a 6% of sales tax to the government. This rate is the same as the GST tax. Therefore, there should be no large changes in terms of prices in these services.
Consumers
Will be impacted differently depending on their spending habits. You can visit our blog post to get a detailed idea on how SST impact on different spending habit types.
TreezSoft
TreezSoft cloud accounting software is SST ready. We will make your company's preparation for transition between GST and SST simple and easy. TreezSoft is a software that can help you manage your company’s financial health efficiently. We uses series of automation and integration to make sure our accounts are up-to-date and accurate at all times. You can easily monitor and manage your company’s finance even if you are traveling.
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