What you need to know about Malaysia's SST so far

Over the weekend, the new Sales Services Tax (SST) took effect, seeing a tax of between 5% to 10% imposed on the sale of goods and a 6% levy on services. This replaced the Goods and Services Tax (GST) which was set at 6%.

According to a report by The Star Online, a total of 5,443 consumer items have been exempted from the new SST - about 10 times that of what was exempted under the GST when it was introduced in 2015 (545).

During a briefing with the media, Customs Department deputy director-general, Datuk Seri Subromaniam Tholasy, revealed the list of items that would be exempted. This included live animals, daily food items like rice, cooking oil and bread, general goods like newspapers and sanitary pads, and vehicles including bicycles, motorcycles below 250cc, and forklifts.

Additionally, private hospital services like ward and food, veterinary services, as well as flights within Sabah and Sarawak will not be taxed.

However, some common household items under the tax include electrical appliances like washing machines and radios, personal items like shampoo and shower gel, as well as processed foods like fruit juice and butter.

Similar to the GST, businesses will also be subjected to the new tax.

That said, there has been a reduction in the number of service tax-applicable businesses - 43.49% compared to 65.85% of services that were GST-applicable.

“There were 472,000 business that were registered with GST, but we expect only 80,000 businesses to register with SST,” Subromaniam said.

“About 85% of businesses will be out of the tax net,” he said, adding that this would help reduce prices as small manufacturers, cottage industries and small retailers will not be burdened by taxation.

Subromaniam said the compliance cost for businesses that are SST taxable is also lower, thus further lowering their prices.

“There are no refund mechanisms … . Unlike GST, they do not have to purchase special accounting software, conduct staff training or appoint GST consultants to manage their accounts,” he said.

Subromaniam said that GST was a complicated taxation system for businesses to manage as there were 36 tax codes for different items.

In a separate report by New Straits Times, Malaysia's Finance Minister, Lim Guan Eng, revealed that the government is still reviewing the SST and will be making changes by the end of 2018 to factor in the views of the people.

Among items that could be affected by the changes are prawns, the minister revealed, noting that they were covered under the SST even though they were eaten by most people as a result of seafood being lumped together with abalone.

Among other considerations include accessories for bicycles and motorcycles under 250CC.

Lim said: "We will study all of these. We have been going around listening to feedback from the people. Some are asking that certain items affected by the STT be taken off the list. As a concerned government, we will do the needful."

He also called for the understanding from patrons of nasi kandar restaurants charging the six per cent SST, noting that eateries exceeding the RM1.5 million threshold annually were required to do so.

"I hope the patrons understand. It is not like their favourite nasi kandar joint purposely imposed the SST, but they have exceeded the treshold. Don’t fault these outlets. They are just being responsible and abiding by the law."

Among other things, Lim noted Free Trade Zones, special areas and tax-free areas, such as Langkawi, were not subjected to the SST regime, and telecommunication companies must ensure that customers were given the full RM10 amount when they topped-up their mobile prepaid phones.

"We have issued a directive and we want all telecommunication companies to abide by it. The six per cent SST should not be passed on to customers," he said.

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