In Malayisa, there will be a major change in our tax system starting from 1st September 2018. The consumer tax system will be changed from Goods and Services Tax (GST) to Sales and Service Tax (SST) by 1st September 2018. According to the proposed SST framework published by our custom department on 19th July 2018, there are some changes on how the sales tax and service tax will be accounted for. Below is the explanation for the differences.
Sales Tax Act
According to the proposed SST framework, sales tax will be accounted for by accrual basis. Which means, you will need to pay the taxed amount to Malaysia government whenever an invoice is issued.
Accounting wise, double entry will be done for SST accounts when an invoice is issue. But no worries to TreezSoft cloud accounting software users as this process will be done automatically by TreezSoft system.
Service Tax Act
According to the proposed SST framework, service tax will be accounted for by payment basis. Different from the sales tax, you will only need to pay the taxed amount to the government when a payment is received. Alternatively, SST will be accounted for the day following a period of 12 months when the payment is not fully received from the date of invoice for the taxable service provided.
Accounting wise, double entry will only be done when a “payment received” record is issued. Good news for TreezSoft users, our system will capture and do the double entry for such processes automatically as well.
SST in transition period
However, during the transition period from GST to SST (transition date is on 1st September 2018), SST will be accounted based on delivery basis. Meaning, SST will be charged according to the time of service or goods delivery. Below are some examples to help you understand how SST will be accounted or charged.
Example 1
On 1st August 2018, you’ve bought and paid for your air ticket that is scheduled to fly on 7th September 2018.
You will need to pay Service tax 6% because the flight service will only be delivered on 7th September.
Example 2
You have provided services from 30th August to 1st September and the payment is received on 7th September.
You will have to charge GST 0% on the portion of service provided before 1st September 2018 and charge a 6% Service tax on services provided after 1st September 2018.
Example 3
You’ve purchased and paid for a car before 1st September, but the car is only delivered to you after 1st September.
The purchase is still accountable for a 10% Sales Tax. If payment is made, supplier can choose to cancel the invoice or issue a credit note on the invoice and issue a new invoice will a 10% sales tax, or issue a debit note bearing the amount for 10% sales tax.
Example 4
You’ve purchased a product and its delivered to you on 22nd August 2018. But you only paid on 11th September 2018.
A 0% GST rate will be charged to the purchase as the product is delivered to you before 1st September.
After the transition period
After the transition period, Sales and Service Tax will be charged on accrual and payment basis repectively. This is based on the newly proposed SST framework.
TreezSoft is SST ready
Do you want to avoid the hassle of changing from GST to SST? TreezSoft is SST ready and will ensure smooth transition and free updates to all our clients.
Sign up now with TreezSoft cloud accounting and we will get that covered for you. Visit TreezSoft at http://www.treezsoft.com/pricing.html to sign up for a 30 days trial account with us!
You can also email us at [email protected] for more enquiries.