Sales Tax and Service Tax 2018 - Managing the transition - Volume 6 - Issue 4 - 3 August 2018 - EY
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Volume 6 - Issue 4 – 3 August 2018
Sales Tax and
Service Tax 2018
Managing the transition“ Businesses which are impacted
by the new Sales Tax and Service
Tax need to develop a clear
roadmap to implement the
necessary changes to processes
and systems.
In tandem with compliance to the
new indirect tax regulations,
businesses should be cognizant “
of other related regulations and
avoid potential pitfalls when
transitioning to the new regime.
Yeo Eng Ping
EY Asean Tax Managing Partner
“ Aside from sorting out the tax
compliance intricacies,
businesses should seize the
opportunity to re-evaluate the
“
efficiency of their operations
across the people-processes-
technology spectrum.
Amarjeet Singh
Partner and Malaysia Tax Leader
Ernst & Young Tax Consultants Sdn BhdDRAFT
A return to the familiar SST
On 31 July 2018, in the latest steps to abolishing the Businesses will need to undertake an efficient
Goods and Services Tax (GST) and returning to the SST implementation project in the short time
Sales and Service Tax (SST) regime, the Ministry of available, to ensure a positive outcome from
Finance tabled the following Bills to the Dewan the transition process. This will include:
Rakyat for first reading: ► Assessing the impact on people, processes
► Goods and Services Tax (Repeal) Bill 2018 and systems in complying with the new SST
► Sales Tax Bill 2018 legislation
► Service Tax Bill 2018 ► Engaging in pro-active stakeholder
► Customs (Amendment) Bill 2018 engagement and communication on
► Free Zones (Amendment) Bill 2018 potential commercial implications
► Ensuring adherence to relevant regulations
As expected, the Sales and Service Tax Bills are that may have an impact post-SST
largely similar to the legislation in place prior to the implementation, e.g. Price Control and Anti-
introduction of GST. This will be a relief to businesses Profiteering Act 2014
familiar with the taxes, particularly those required to
be registered, to collect and pay, as in theory, this
should make the short implementation period a little
easier. New SST: key points
Notable changes from the previous SST framework: ► SST applies to locally manufactured
► Registration threshold of RM500,000 and imported taxable goods (unless
► Sales tax: A more concise definition of
exempted), as well as certain
‘manufacture’, expansion of the list of exempted prescribed services.
goods and inclusion of Special Areas (SAs)
► Service tax: Expansion of the list of taxable
► Sales tax rate is expected to be 5%
services, removal of inter-group services
or 10%, while service tax is 6%.
exemption and inclusion of SAs
Administration of both taxes will now be carried out ► SST is planned to be implemented
online, through the MySST system, similar to GST. with effect 1 September 2018.
This is a welcome initiative for businesses, given how
manually intensive the administration was under the ► MySST System will be introduced to
previous SST regime. facilitate online SST registration
and compliance.
Chart 1: Regulatory milestones - the new SST regime
1 Sep
1st week of Aug 27 Aug SST
Tabling of the Bills to Royal Assent implementation2
Dewan Rakyat and Gazette
Aug 20 Aug 28 Aug Sep
2018 Tabling to Gazette on 2018
Dewan Negara subsidiary
legislations
Notes:
1 Other Bills tabled in Parliament include the Goods and Services Tax (Repeal) Bill 2018, and two other Bills to amend the Free Zones Act 1990 and
Customs Act 1967.
2 The proposed SST legislations to-date include:
► Acts – Sales Tax Act 2018 and Service Tax Act 2018
► Regulations – Sales Tax Regulations 2018, Service Tax Regulations 2018, Customs Ruling Regulations and Compounding of Offences
► Orders – Rate of Tax Orders 2018, Exemption Orders and Appointment of Coming into Operation Order
Take 5: Sales Tax and Service Tax 2018 – Managing the transition 2DRAFT
Overview of SST: Key notes
Sales Tax
Scope Who is impacted?
All taxable goods manufactured and sold, used or Companies that manufacture and sell, use or
disposed by a taxable person in Malaysia, unless dispose of goods in Malaysia, with annual
listed under the Proposed Sales Tax Exemption taxable sales of RM500,000 or more and are
Orders, as well as taxable goods imported into registered, or are liable to be registered, under
Malaysia the Sales Tax Act 2018
Proposed Sales Tax Framework
Registration Mandatory (where applicable) or voluntary
Transitional Manufacturers who are GST-registered persons and who meet the required criteria
registration will be registered automatically for Sales Tax
Rate of tax 5% , 10% or a specific rate
Return submission ► Bi-monthly
and payment ► Electronically or by post
► 10% - first 30-day period
► 15% - second 30-day period
Late payment
► 15% - third 30-day period
penalty
*Maximum penalty of 40% after 90 days
► Goods listed under the Proposed Sales Tax (Goods Exempted from Sales Tax)
Order 2018
Exemption from
Sales Tax ► Persons listed under the Proposed Sales Tax (Persons Exempted from Sales Tax)
Order 2018
► Sales Tax (Exemption from Registration) Order 2018
Sales Tax is required to be accounted for at the time when the goods are sold,
Accounting basis
disposed of or first used (accrual basis).
Take 5: Sales Tax and Service Tax 2018 – Managing the transition 3DRAFT
Service Tax
Scope Who is impacted?
All taxable services made in the course or Companies whose value of taxable services (for
furtherance of any business in Malaysia a period of 12 months) exceeds a threshold of
RM500,000 and are registered, or are liable to
be registered, under the Service Tax Act 2018
Proposed Service Tax Framework
Registration Mandatory (where applicable), voluntary (branch/division level available)
Service providers who are GST-registered persons, making supplies of taxable
Transitional
services and who meet the required criteria, will be registered automatically for
registration
Service Tax.
Rate of tax 6% and a specific rate for credit cards (RM25)
Return submission ► Bi-monthly
and payment ► Electronically or by post
► Employment agencies
► Hotels
► Security
► Insurance and takaful
► Management services
► Food and beverage preparation
► Parking
► Clubs
► Motor vehicle services or repair
► Gaming
► Courier
Taxable services ► Telecommunications
► Hire and drive cars
► Pay-TV
► Advertising
► Forwarding agents
► Domestic flights except Rural Air
► Legal
Services1
► Accounting
► Credit or charge cards
► Surveying
► IT services1
► Architecture
► Electricity1 in excess of 600 kWh (to
► Valuation
end consumers)
► Engineering
► Consultancy
A registered person is allowed to deduct Service Tax in his return for any
Contra system cancellation and/or termination of services or any other reasons such as reducing
premiums or giving discounts.
No exemption order specifically mentioned in the proposed model.
Exemptions The Minister has the power to grant exemption(s) to any person subject to Service
Tax.
Note:
1 Additional taxable services
4 Take 5: Sales Tax and Service Tax 2018 – Managing the transitionDRAFT
Penalties under the new regime
Sales Tax Act
Sales Tax Bill 2018
1972
► Liable to a fine of 10 to 20 ► Liable to a
times the amount of Sales maximum fine
First time Tax evaded of RM50,000
offender ► Maximum five years’ jail Fine of between ► Up to three
► Or both RM50,000 and years’ jail
RM500,000 if the exact ► Or both
► Liable to a fine of 20 to 40 amount of Sales Tax
times the amount of Sales evaded could not be
Second or determined
Tax evaded
subsequent N/A
► Maximum seven years’ jail
offence ► Or both
► Liable to a
maximum fine
► Liable to a fine of between RM2,000 and RM20,000 of RM5,000
Abetting ► Maximum three years’ jail ► Up to one year
► Or both imprisonment
► Or both
Source: Media sources, Royal Malaysian Customs Department: SST FAQsFive steps
Actioning a smooth transition
Analyze your set of goods and services
1 ► Conduct a transaction analysis of your business to identify the
SST treatment of taxable goods and services
Implement a change management process
2 ► Have a change management protocol for transaction mapping,
contract reviews, customer and vendor communication, systems
impact and pricing
► Devise contingency actions for any post-implementation hiccups
Prepare SST registration and tax filing in advance
3 ► Ensure applicable and accurate SST registration
► Develop efficient SST reporting processes and documentation
management
Engage and communicate with stakeholders
4 ► Report to stakeholders the impact of the change on the
business relationships
Post-implementation review of transition
5 ► Review accuracy of transition and correct application of GST
and SST reportingDRAFT
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All Rights Reserved.
eng-ping.yeo@my.ey.com
APAC no. 07001372
EDNone
This material has been prepared for general informational
Amarjeet Singh purposes only and is not intended to be relied upon as
Partner and Malaysia Tax Leader accounting, tax or other professional advice. Please refer to
Ernst & Young Tax Consultants Sdn. Bhd. your advisors for specific advice.
Tel: +603 7495 8383 ey.com/my
amarjeet.singh@my.ey.com
Yeoh Cheng Guan
Malaysia Indirect Tax Leader
Ernst & Young Tax Consultants Sdn. Bhd.
Tel: +603 7495 8408
cheng-guan.yeoh@my.ey.com
Aaron Bromley
Partner, Indirect Tax
Ernst & Young Tax Consultants Sdn. Bhd.
Tel: +603 7495 8314
aaron.bromley@my.ey.com
Bernard Yap
Malaysia FSO Tax Leader
Ernst & Young Tax Consultants Sdn. Bhd.
Tel: +603 7495 8291
bernard.yap@my.ey.comYou can also read
