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What Is SST And What Services Are Exempted From It?

What Is SST And What Services Are Exempted From It?

The recent tax reforms see some services and products levied an 8% tax while some remain at 6%.

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What is SST?

SST stands for Sales and Services Tax and it was implemented to help increase the country’s revenue.

SST is comprised of two parts:

  • The Sales Tax: A single-stage tax levied on all types of taxable goods being manufactured in or imported into Malaysia.
  • The Service Tax: A tax levied on taxable services provided by businesses in Malaysia.

SST replaced the Goods and Services Tax (GST) system on 1 September 2018 as it was seen as a robust and people-friendly tax collection system.

In Malaysia, there are three SST rates for different goods and services:

1. A sales tax at 10% is a standard sales tax in Malaysia, levied on taxable goods and imported taxable goods. It’s generally applied to luxury items or goods that are not considered essential. This tax type is not deductible by the taxpayer.

READ MORE: 10% Sales Tax On Low-Value Online Goods Below RM500 Starting From 1 January 2024

2. A sales tax at 6% is applicable on services provided such as in hotels and accommodations, restaurants, car repair and rental services, insurance, domestic flights, credit cards, electricity, telecommunications, legal or accounting services, and business consulting.

3. A sales tax at 5% is applicable for goods such as petroleum oils, construction materials, food, timepieces, IT, printing materials, and hardware.

For illustration purposes.

Some items that are not taxed include printed materials, bicycles, pharmaceutical products, residential building repair, sinking funds, and maintenance charges imposed by developers.

Businesses that are also excluded from SST are jewellers, tailoring, opticians, and traditional and complementary medicine services (TCM).

On 28 February 2024, the Ministry of Finance announced that there would be an increase in SST from 6% to 8% effective 1 March 2024.

The new rate is focused on discretionary activities and business-to-business services (B2B) to shield the public from paying higher consumption tax for key essential services such as food and beverage, telecommunications, parking, and logistics.

The 8% tax is also applicable to electricity usage above 600kWh, and entertainment places such as karaoke centres, nightclubs, dance halls, cabarets, and wellness centres.

READ MORE: Electricity (Below 600kwh) And Water Remain Exempt From SST Hike

According to Malay Mail, the tax increase is expected to generate an additional RM3 billion in revenue.

As of 11 March 2024, it has been decided that a 6% service tax will be maintained for some services from 1 April 2024.

The services maintaining a sales tax of 6% are:

  • Logistics, warehousing, courier, transport and supply chain services (replacing courier & warehousing services)
  • Food and drink
  • Telecom services
  • Parking

The differences between SST and GST

In the simplest terms, the price of a product or service is inclusive of GST while SST works as an add-on on top of the selling price.

GST charges a 6% tax regardless of the types of products or services provided. However, for SST, the rates vary depending on the type of services and goods.

The government is helping to reduce double taxation

The Ministry of Finance is set to enhance the scope of tax exemptions for the logistics sector to reduce double taxation or cascading effects resulting from taxing multiple layers within the logistic supply chain.

The Ministry of Finance has announced a tax exemption for:

  • Logistic services for direct export products
  • Logistic services for transhipment activities
  • Door-to-door logistic services
  • Food and drinks delivery services via e-commerce

B2B businesses are also exempted from tax for the acquisition of similar logistic service components.

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