Malaysia started imposing a tax of 5 per cent and 10 per cent on the sale of goods, and a 6 per cent levy on services with effect from Sept 1 (Saturday).
The Sales and Services Tax (SST) replaced the Goods and Services Tax (GST) which Prime Minister Mahathir Mohamad scrapped after returning to office earlier this year.
It is placed on taxable goods manufactured by an individual or company with an annual turnover exceeding RM500,000 ($121,000); and on taxable goods imported into Malaysia.
Here are five things to know about SST:
1. The number of goods exempted from SST is ten times more than GST
Only 545 consumer items were exempted from GST – which was charged at 6 per cent – when it was first implemented in 2015. With SST, a total of 5,443 items have been exempted.
2. Some daily essentials are exempted from tax
Items exempted from sales tax include fresh food such as meat, eggs, vegetables and fruits. Other daily essentials like rice, coffee, tea, milk powder, sugar, palm and coconut cooking oil are also spared.
There will also be no sales tax imposed on medicines and pharmaceutical products; as well as personal hygiene products like diapers and sanitary pads.
On the transportation front, vehicles including bicycles, motorcycles below 250cc and forklifts; and petrol and diesel will not be taxed.
Items made in or imported into duty-free islands of Langkawi, Labuan and Tioman are also exempted.
3. But you’ll still need to pay 5 or 10 percent sales tax on these items
Items liable for 5 per cent sales tax include food products like olive, sunflower and groundnut cooking oil, butter and three-in-one coffee. Mobile phones, cordless phones and laptops will also be subjected to the same amount of tax.
Those items that will carry a 10 per cent sales tax include shellfish, canned drinks, household electrical appliances, toilet paper, tissue, and cosmetics. Cars and motorcycles exceeding 200cc will also be similarly taxed.
4. Service Tax
Services provided by hotels, insurance companies, telcos and professionals like lawyers and accountants are subject to a 6 per cent service tax. However, it’s payable only if these businesses have an annual revenue that is more than RM500,000.
For food and beverage outlets, only those with an annual revenue of over RM1.5 million will need to pay the service tax.
A separate annual service tax of RM25 per credit card will also be levied on card users.
5. Less businesses will have to pay SST compared to GST
Customs Department director-general Datuk Seri Subromaniam Tholasy told media last week that the number of service tax-applicable businesses is 43.49 per cent compared to 65.85 per cent that were GST-applicable.
He said: “There were 472,000 business that were registered with GST, but we expect only 80,000 businesses to register with SST.”