GOOD AND SERVICE TAX (GST)

17 months before GST implementation:

As announced on 25th October 2013 by our prime minister, Dato Seri Najib Tun Razak,
GST implementation is set to be effective on 1st April 2015 at 6%.
6 months before GST implementation
GST Registration starts on October 2014
It is the recommended period of time to register GST since it provides adequate time
for businesses to make preparation
3 months before GST implementation
January 2014
GST system makes compulsory for businesses which exceeded the prescribed
threshold to register GST
Official date of GST implementation
1st April 2015
GST registered businesses begin to charge 6% GST
What is GST?
Goods and Services Tax or GST is a consumption tax based on value-added concept.
Unlike the present sales tax or service tax which is a single stage tax, GST is a multistage tax.
Payment of tax is made in stages by intermediaries in the production and distribution
process. The tax itself is not a cost to the intermediaries since they are able to claim back
GST incurred on their business inputs.
GST is imposed on goods and services at every production and distribution stage in the
supply chain including importation of goods and services.

What is the significance of GST?

GST is a better tax system. It is more transparent, efficient, effective, self policing and
less bureaucratic. GST would eliminate double taxation under the current SST. Consumer
will pay fair prices for most goods and services compared to SST.

For businesses, they are able to reduce their cost of doing business since they are able to
claim GST incurred on their business inputs.
For example, under the current taxation system, manufacturers are not allowed to claim
service tax on telecommunication, accounting and legal services and sales tax on indirect
inputs such as office equipment and furniture. These taxes are embedded into the price of
the goods sold. Hence, the cost of doing business increases.
Under the GST system, any GST incurred on acquisition is claimable and is not a cost to
businesses.
As such, Malaysian exports will become more competitive in the global market as no
GST is imposed on exported goods and services. This will strengthen our export sector
which would contribute to the economic growth of the country.

Understanding GST Concept and Fundamental

SALE AND SERVICE TAX (SST)

Service Tax
Service Tax is a form of indirect tax imposed on specified services called "taxable
services". Service tax cannot be levied on any service which is not included in the list of
taxable service.

A service tax applies to certain prescribed goods and services in Malaysia including:
food, drinks and tobacco
provision of rooms for lodging and premises for meetings, conventions, and cultural
and fashion shows
health services, and provision of accommodation and food by private hospitals.
The tax also applies to professional and consultancy services provided by accountants,
advocates and solicitors, engineers, architect, surveyors (including valuers, assessors and
real estate agents), advertising agencies, consultancy firms, management service provider,
insurance companies, motor vehicle service and repair centres, telecommunication
services companies, security and guard services agencies, recreational clubs, estate
agents, parking space services operators and courier service firms.
However, professional services provided by a company to companies within the same
group will be exempted from the current service tax of 6%. Courier services provided
from a point within Malaysia to a destination outside Malaysia will also be exempted
from the service tax of 6%.
Generally, the imposition of service tax is subject to a specific threshold based on an
annual turnover ranging from RM150,000 to RM500,000.

Sales Tax
Sales tax is a single stage tax imposed at the import or manufacturing levels. In Malaysia,
manufacturers of taxable goods are required to be licensed under the Sales Tax Act 1972.
Companies with a sales turnover of less than RM100,000 and companies with Licensed
Manufacturing Warehouse(LMW) status are exempted from this licensing requirement.

However, companies with a sales turnover of less than RM100,000 have to apply for a
certificate of exemption from licensing.
Licensed manufacturers are taxed on their output while manufacturers that are not
licensed or exempted from licensing need to pay tax on their inputs. To relieve smallscale manufacturers from paying sales tax upfront on their inputs, they can opt to be
licensed under the Sales Tax Act 1972 in order to purchase tax-free inputs.
With this, small-scale manufacturers can opt to pay sales tax only on their finished
products.
Sales tax is generally at 10%. However, raw materials and machinery for use in the
manufacture of taxable goods are eligible for exemption from the tax, while inputs for
selected non-taxable products are also exempted.
Certain non-essential foodstuffs and building materials are taxed at 5%, general goods at
10%, liquor at 20% and cigarettes at 25%. Certain primary commodities, basic foodstuffs,
basic building materials, certain agricultural implements and heavy machinery for use in
the construction industry are exempted. Certain tourism and sports goods, books,
newspapers and reading materials are also exempted.

The Differences between GST and SST

1.

SST is a single tax (one-way) while GST is a multistage tax which based on
consumption.

2.

Total payable taxes from consumer to government:

SST: Manufacturer of XYX can drink pays 10% sales tax to government and when the
product reach to fine dining, the restaurant will need to collect 6% service tax on behalf

government and ended up the consumer will need to pay a total of 16% tax to the
government.
GST: The good news is the consumer might be paying LESS!
How it goes?
As the GST rate is the standard 6% where the manufacturer pays 6% and fine dining
restaurant pays as well 6%, as a result the end consumer pays up the total of 12% of GST
tax.