Registration Paying Sales and Service Tax (SST) should be easy. Why is this a problem for many companies?
This is not a matter of choice. The law stipulates that taxable persons who provide taxable services or goods exceeding a prescribed threshold must be registered. Businesses must register if they meet the requirements.
Service tax applies only to services specified in Schedule 1 of the Service Tax Regulations 2018. This is commonly called the “positive list”. This effectively means that if the service is not listed, no service tax will be applied.
Consumption tax is the opposite. It is based on a “negative list”. All products manufactured in Malaysia that are not specifically exempted under the Sales Tax Act 2018 are subject to the tax.
Although this is called “SST”, they are two separate taxes and you should carefully review the provisions and related regulations to meet their respective requirements.
Timing of registration
Deciding when to enroll is based on two methods. First, by looking at it on a forward-looking basis, at the end of each month, it should be determined whether the taxable services or goods for the current month and the next 11 months exceed the relevant threshold. The second method is the same, but he goes back 11 months in addition to the current month.
There are various standards for service tax. A common threshold for most cases is RM500,000. However, the standard for restaurants is RM1.5 million and zero for customs and credit card companies. The sales tax base value is a single base value of RM500,000 for the manufacture of taxable goods. These calculations should be performed continuously on a monthly basis.
Imported services and goods
Businesses importing goods and services are required to self-assess sales tax and service tax regardless of whether they are registered with the SST. If you have not yet registered, please use the import service form “SST-02A” and submit it at the end of the month following the month in which you received the service. Imported goods must be declared on import using Customs Form “K1”.
Problems faced by taxpayers
The main reason taxpayers are unable to register for the SST is that they themselves do not track their forward and backward movements every 12 months. However, some issues may seem ambiguous to taxpayers, such as the interpretation of whether services are taxable.
An example is the interpretation adopted by the Royal Malaysian Customs Department (Customs) for a wide range of administrative services, which may overlap with other taxable services such as consulting and IT, or other services not subject to service tax. .
Concerning sales tax, interpretation problems can arise from the ambiguity in determining the correct HS code to which the sales tax rate of 5%, 10% or “exemption” applies.
Consequences of failed registration
In case of failure to register by the deadline, Customs has the power to collect the tax with a fine of up to 40% of the unpaid amount from the time the enterprise should have duly collected the tax. Such affected businesses will not be able to retrieve information from their customers during the period of failure to register.
Benefits of registration
The main advantage of registration is avoidance of multiple stages of taxation in the supply chain. If the taxpayer is registered, it is possible to apply a business-to-business deduction and the tax is only paid at the end of the sale rather than at each point in the supply chain.
If you fail to register, you have the opportunity to come clean through Customs’ Voluntary Disclosure Program, which provides full exemption from penalties. Ends May 31, 2024.
this This article was contributed by SM Thanneermalai, Managing Director, Thannees Tax Consulting Services Sdn Bhd (www.thannees.com).
