Sales & Service Tax (SST)

Sales & Service Tax (SST), also known as Goods and Services Tax (GST) is an indirect tax applied on the value added to goods and services at each stage of production or distribution. It is a consumption tax because the final consumer ultimately bears it, although it is collected at each stage of the production and distribution process. VAT is used in many countries worldwide as a major source of government revenue.

Malaysia does not implement a Sales & Service Tax (SST) system but has a Sales and Services Tax (SST) regime, which serves as the nation’s form of indirect taxation on the consumption of goods and services. The SST system, reintroduced in September 2018, replaced the Goods and Services Tax (GST) and is designed to simplify tax compliance and reduce the tax burden on consumers and businesses.

 

The Structure of SST

The SST is divided into two components: Sales Tax and Service Tax. Sales Tax is levied on the manufacturing and importation of goods at rates ranging between 5% to 10%. In contrast, Service Tax applies to specific services provided in Malaysia at a standard rate of 6%. This system aims to target taxation at the manufacturing level for goods and at the point of consumption for services, distinguishing it from the broader base and multi-stage GST it replaced.

 

Impact and Administration

The transition from GST to SST aimed to alleviate living costs by narrowing the tax base and focusing on end-stage taxation. This shift is expected to reduce government revenue but simplify the tax administration process for businesses. Under SST, compliance requirements are less stringent than the GST framework, with the Royal Malaysian Customs Department overseeing the administration of both taxes.

SST’s reintroduction reflects Malaysia’s approach to balancing revenue collection with economic growth and consumer welfare. While it reduces the complexity of tax reporting for businesses, the impact on prices varies across different sectors. Understanding the nuances of SST is crucial for businesses operating in Malaysia to ensure compliance and optimise their tax obligations.