An Outlook Of Sale And Service Tax (SST)

GST has been zero rate since 1 Jun 2018, meanwhile SST will be scheduled to implement from effective 1 Sept 2018 onward. Let us review closely how the SST difference between GST and previous Sales Tax and Service tax, also know as old SST in this article.

1) Registration threshold

An old SST, sales tax was very its registration threshold according to difference sector. An example the threshold for the manufacturing sector was RM100,000 and sub-contractor was RM20,000. Meanwhile the service tax also varies with different industry, from RM300, 000 to zero, an example : legal firm and an audit firm were subject to old SST in respect no threshold was set for this sector.

With the implementation GST all industries ware harmonise into a single threshold of

RM500,000 annually. It means those businesses below RM500, 000 may choose to voluntarily registration, even though not necessarily by the GST Act 2014. This is easy to monitor, since it is the only single threshold for all sectors.

2) Scope of charges

Sales tax mainly covers manufacturers and importer of specific goods, meanwhile wholesales and retailers did not cover under the act. While Services Tax was focused on specific industry such as, hotels, restaurants, massage parlours, night clubs, golf course, private hospital, professional service and etc.

GST which is broad-based tax, which can be classified as standard rate, zero rated supply and exempted supply. Most of the products and services under this category. Zero rated for those basic materials such as fish, vegetables, fruits, petrol and etc. Finally, the exempted supply would be, residential building, financial services, private hospital, toll and etc. Each of supply may have different tax rate.

3) Input tax claimable

Under the old SST, is a single-tier tax regime, which has covered by the manufacturer, therefore the cost of production was inflated to include the Sales tax and the wholesales and retailer without the knowledge of the Sales Tax being imposed and no tax input was required to claim from the Royal Custom Department.

However, GST was a multi–tier tax regime, the GST imposed to every level of trade from the manufacturer, wholesale, retailer and finally the customer. Every layer within the supply chain was eligible to claim an input tax. The output tax collects on behalf the Royal Custom Department require to set off with the input tax incurred from the purchase before remit consumption tax to Royal Custom Department. GST is taxed on the value added to the supply and customer will be the final level to pay for the GST. Therefore, GST is a more transparent tax since the payer know how much taxes they have been paid.

4) Tax rate

Again the old SST has difference tax rate, generally impose a 10%, food, building materials etc was 5%, compound preparations used for beverage was 20%, service tax was 6%, credit card for principal card was RM50, and supplementary card was RM25.

GST has only 2 types of tax rate either 6% or 0%. 0% is for zero rated supply meanwhile standard supply was charged at 6%.

Conclusion:

We hope the Government will unveil the new SST as soon as possible, since it will require the business to understand and prepare the implementation of the new SST without a hassle.

#SST