Sales tax is charged and levied on all taxable goods:
(i) Manufactured and sold, used or disposed of in Malaysia by a registered manufacturer; or
(ii) Imported into Malaysia by any person.
Sales tax is an ad valorem tax and different rates apply based on group of taxable goods. Sales tax for petroleum is charged on a specific rate which is different from other taxable goods.
In the case of locally manufactured goods, sales tax is levied on the sales value of the taxable goods.
Generally, the transaction value of the taxable goods forms the basis of the sales value of such taxable goods.
With regards to taxable goods imported into Malaysia for home consumption, the sales value of the taxable goods represents the sum of the following amounts:
(i) The value of such taxable goods for the purpose of customs duty as determined in accordance with the Customs Act 1967;
(ii) The amount of customs duty, if any, paid or to be paid on such taxable goods; and
(iii) The amount of excise duty if any, paid or to be paid on such taxable goods.
The total sale value of taxable goods for the purpose of registration of any manufacturer is RM 500,000.
The sales tax chargeable is due at the time when the taxable goods are sold, disposed of or first used by the taxable person.
No sales tax is due on the purchase or acquisition below when a registered manufacturer ceases to carry on a business as a manufacturer and he is succeeded by another person and that person who succeeds him either:
(i) Purchases his stock of taxable goods held on hand on the date of cessation; or
(ii) Acquires any of his stock of taxable goods as a trustee, receiver, liquidator, donee, or beneficiary of the registered manufacturer.
Registration
Every person engaged in the manufacturing of taxable goods in the course of business is required to apply to be a registered manufacturer not later than the last day of the month following the month he is liable to be registered.
Example 1
Liable to be registered is on 15 December 2018
Apply for registration within the period 1 January to 31st January 2019.
To determine whether a person is subject to such requirement, it is pertinent to ascertain that his operation complies with the definition of ‘manufacture’ and the product arising from the operation is taxable.
Manufacture defines as a conversion of materials by manual or mechanical means into a new product by changing the size, shape, composition, nature or quality of such materials and includes the assembly of parts into a piece of machinery or other products. However, manufacture does not include the installation of machinery or equipment for the purpose of construction.
A manufacturer of taxable goods is liable to be registered at the earlier of:
(i) Not later than the last day of the month following the end of the month where the total sale value of all his taxable goods in that month has exceeded RM 500,000; or
(ii) Not later than the last day of the month following the end of the month where the total sale value of all his taxable goods in that month and the eleven months immediately succeeding the month will exceed RM 500,000.
A manufacturer who carries out sub-contractor work with threshold exceeding RM500,000 per year is liable to be registered.
Application for Registration
Any person who carries on a business of manufacturing taxable goods shall apply for registration as a registered manufacturer in the Form SST- 01.
Example 2
Able Copier Sdn Bhd manufactures and sells photocopiers besides providing after-sale service. Able Copier sells taxable goods and provides non-taxable services.
He is only required to be registered under Sales Tax Act 2018.
Cessation of Liability to Be Registered
The registered manufacturer shall notify the DG in writing including the date of cessation if:
(i) He ceases to carry on the business of manufacturing taxable goods; or
(ii) His total sale value of taxable goods in that month and the eleven months immediately succeeding that month does not exceed RM500,000.
The registered manufacturer may make a written request to cancel his registration within 30 days from the date of cessation.
Exemption from Registration
The following manufacturers are excluded from registration as provided under such order:
(i) Manufacturer of non-taxable goods
(ii) Manufacturer below threshold;
(iii) Sub-contractor manufacture below threshold; or
(iv) Manufacturing activities that have been exempted from registration. e.g. tailoring, installation or incorporation of goods into building, jeweller, optician
1. Invoices
Every registered manufacturer is required to issue an invoice, either in hard copy or electronically to the purchaser in respect of any transaction relating to the sale of taxable goods.
The invoice must comply with the following requirements:
1. Contain prescribed particulars:-
(a) The tax invoice serial number;
(b) The date of the invoice;
(c) The name, address and identification number of the registered manufacturer;
(d) The name and address of the person to whom the taxable goods is sold;
(e) Quantity and description of the goods;
(f) Any discount offered;
(g) For each description, distinguish the type of goods, quantity and amount payable excluding tax;
(h) The total amount payable excluding tax, the rate of tax and the total tax chargeable to be shown as a separate amount or a total amount payable inclusive of total of tax chargeable; and
(i) Any amount expressed in a currency other than ringgit shall also be expressed in ringgit at the selling rate of exchange prevailing in Malaysia at the time of manufacturing.
2. It must be in the national language or English.
Issuance of invoice electronically is allowable.
Example 3
Able Furniture manufactures and sells kitchen cabinets and appliances besides providing consultancy services to design and remodel kitchens. Able Furniture is manufacturing taxable goods and providing taxable services (consultancy services).
Hence he is required to be registered under Sales Tax Act 2018 and Service Tax Act 2018. However, he may use the same invoice format for either the sale of goods or provision of services subject to approval of the Director General.
2. Credit Notes and Debit Notes
A credit note is issued when the amount previously invoiced is reduced or a transaction is cancelled due to the following circumstances:-
a) where goods are returned by the purchaser due to wrong quantity, poor or defective quality; or
b) discounts given on taxable goods sold by the taxable person where the discount is given freely to all his customers.
If the taxable person has furnished his return to the DG and subsequently there is a deduction of sales tax, the taxable person selling taxable goods must issue a credit note for such deduction.
On the other hand, a debit note is issued when the amount previously invoiced is increased due to an addition of sales tax to be paid for any price adjustment.
A credit note or debit note must contain the following particulars:
(i) The words “credit note” or “debit note” in a prominent place;
(ii) The serial number and date of issue;
(iii) The name, address and identification number of the registered manufacturer;
(iv) The name and address of the person to whom the taxable goods is sold;
(v) The reason for the issuance;
(vi) The description, quantity and amount of taxable goods for which the credit note or debit note is given;
(vii) the total amount excluding tax;
(viii) The rate and amount of tax; and
(ix) The number and date of the original invoice.
Where the deduction for any taxable period exceeds the amount of sales tax payable by a taxable person, the balance is to be carried forward to the next taxable period and subsequent taxable periods, until the whole balance has been deducted.
In the case where the taxable person ceases to carry on business, no refund shall be allowed on any balance that is carried forward to the period where such taxable person has ceased to carry on business.
Duty to Keep Records
It is the duty of every registered manufacturer to maintain full and true records of all transactions involving the sales of taxable goods. Such records or books of accounts must be maintained in the national language or English.
The records must be kept in Malaysia unless otherwise approved by the Director General. The required records are: -
(i) All records of sales of taxable goods by or to that taxable person including invoices, receipts, debit notes and credit notes;
(ii) All records of importation and exportation of taxable goods
The basic records to be kept are:
(i) Invoices and payment receipt;
(ii) Daily, Monthly or Yearly Sales Report;
(iii) Debtor Aging Listing;
(iv) Credit / Debit Note Listing;
(v) Audited Financial Statement;
(vi) Bank statement; and
(vii) Contractual Agreement and Progressive Report
Records or books of accounts are to be preserved for a period of seven years from the latest date to which such records relate.
Sales Tax Return
A taxable person has to furnish a sales tax return and account for sales tax in Form SST-02 every two months.
The submission can be done electronically at MySST or the taxable person can download and print the Form SST-02 from the MySST portal. The return shall be furnished by post to the Customs Processing Centre.
The sales tax return is required to be furnished to the Director General not later than the last day of the month following the end of the taxable period.
The sales tax return should be furnished whether or not there is tax to be paid.
The taxable person shall furnish, among others, the following particulars in the sales tax return:
(i) Sales value of all taxable goods sold during the taxable period;
(ii) Value of taxable goods disposed of otherwise than by sales;
(iii) Value of all taxable goods used by him otherwise as raw materials;
(iv) The amount of sales tax payable.
Any taxable person who ceases to be liable to be registered or cease manufacturing taxable goods has to furnish a final return not later than thirty (30) days after such cessation.
Payment of Sales Tax Due and Payable
Any taxable person who is required to furnish a sales tax return must pay to the Director General the amount of tax due and payable by him not later than the last day on which he is required to furnish the sales tax return.
Method of Payment
The payment of sales tax can be made by:
(i) Electronically; or
(ii) By cheque, bank draft and posted to customs processing centre. Postdated cheques are not allowed.
Example 4
Company ABC posted a cheque for the payment of sales tax on 25 Jan 2019. The cheque was post-dated as 29 Jan 2019. The cheque was received by the Customs Processing Centre on 26 Jan 2019.
Cheques written by the registered person for a date in the future is not accepted as payment for sales tax by RMCD.
Any payment received by post to the Customs Processing Centre is considered received on the date of the post mark.
Penalty for Late Payment of Tax
For the first thirty days period, that the tax is not paid wholly or partly after the expiry of the period, a penalty of ten percent of the amount of tax remain unpaid;
For the second thirty days period that the tax is not paid wholly or partly after the expiry of the period, an additional penalty of fifteen percent of the amount of tax remain unpaid;
For the third thirty days period that the tax is not paid wholly or partly after the expiry of the period, an additional penalty of fifteen percent of the amount of tax remain unpaid.
Payment by Instalments
In the event that such registered manufacturer is unable to settle the unpaid amount in a single payment, he may apply to the Director General who may allow the unpaid sales tax to be paid by instalments on such amounts and on such dates he may determine. In this case, penalty would not be imposed on such amount of sales tax from the date of allowance.
If the registered manufacturer defaults in payment of any one instalment, a surcharge equivalent to 10% of the outstanding amount will be imposed.
Claim for Refund of Sales Tax In Relation to Bad Debt
The claim for bad debt on the whole or any part of the sales tax payable shall be made within six (6) years from the date the taxable goods is sold subject to conditions and satisfaction of the Director General as follows:
(i) Sales tax has been paid;
(ii) The whole or any part of the sales tax payable has been written off in his accounts as bad debts;
(iii) He has not received any payment in respect of the sale of taxable goods from the debtor six months from the date the goods is sold;
(iv) Reasonable efforts have been made by him to recover the debt.
The debtor where the whole or any part of the sale tax payable to registered manufacturer has been written off in his account as bad debt shall be treated as insolvent. The registered manufacturer is entitled to a bad debt claim if the DG is satisfied that:
(i) In the case the debtor is an individual, he is adjudged of bankrupt, a deed or arrangement is made for the benefit of his creditors or a composition or scheme of arrangement proposed by him is approved under the Bankruptcy Act 1967 or
(ii) In the case where the debtor is a company:
(a) It is ordered by the court to be wound up because it is unable to pay its debts within the meaning of the Companies Act 2016.
(b) A receiver is appointed and the statement of affairs lodged with the Companies Commission of Malaysia shows that its assets would be insufficient to cover the payment of any dividends in respect of debt.
The person making the claim for a refund is entitled for a refund of the whole of the sales tax paid if he has not received any payment in respect of the sale of taxable goods.
If he has received any payment in respect of the sale of taxable goods, the claim can be made for the difference between the sales tax paid and the amount calculated according to the following formula:
Kilang Kertas Merah Sdn Bhd is a registered manufacturer, whom yet to receive the balance of payment including the sales tax amounting RM120,000 from the value of sales of RM220,000 which are not be able to collect. Later, his debtor has been declared as a bankrupt and he is unable to pay the debt. The registered manufacturer has accounted for sales tax of 10% to RMCD. Hence, Kilang Kertas Merah Sdn Bhd is entitled to claim for bad debt based on the calculation as follows: -
Example 7:
A registered manufacturer has received a bad debt refund from DG amounting RM5,000 in respect of the sale of taxable goods at the value of RM105,000 which cannot be collected from the debtor. Four years later the debtor is free from bankruptcy and has paid RM10,000 including 5% of sales tax to the registered manufacturer to settle his debt. Even though the payment is partially received, the registered manufacturer is required to repay the sales tax to RMCD based on the calculation as below: -
Whenever any person make a repayment of sales tax to the DG, he shall:-
(i) In the case of registered manufacturer, repay the amount of sales tax to the DG in his SST-02 return in the taxable period in which he receives the payment of the sales tax from the debtors; and
(ii) In the case of person who has ceased to be a registered manufacturer, the repayment shall be made to the DG in his SST-02 return in the last taxable period during which he was registered.
The person who is claiming bad debt is required to keep all the records and documents related to the claim for a period of seven (7) years from the date of the claim for inspection by the proper officer at any time.
Example 8:
The registered manufacturer is selling taxable goods on 2 September 2018 and no payment has been received. His debtor has been declared bankrupt and the registered manufacturer is claiming the bad debt in the fifth year from the date of sales tax was paid on 1 October 2023.
Hence, the records relating to the bad debt claim shall be kept for an additional period of seven (7) years until 30 September 2030.
A registered manufacturer who is eligible to apply for bad debt claim shall make an application in JKDM Form No.2 together with the following documents:
(i) A copy of invoice issued;
(ii) Form SST-02 or any other documents showing sales tax have been paid and accounted for;
(iii) Records or any other documents showing that the payment has not been received;
(iv) Records or any other documents showing that all reasonable efforts have been taken by the person to recover the payment in respect of the provision of taxable goods;
(v) Record showing that the payment in respect of the provision of sales of taxable goods has been written off in the person's account as bad debt; and
(vi) Records or any other documents relating to the debtor's status as insolvent.
All mentioned documents have to be submitted to the Cawangan Perakaunan Hasil in the controlling zone / state / station.
Refund of Sales Tax, Etc. Overpaid or Erroneously Paid
The Director General may allow the refund of sales tax, penalty, surcharge, or any other money that was overpaid or erroneously paid, provided a claim is made within one year after the overpayment or erroneous payment was made. The application for refund must be made in the prescribed form JKDM 2 together with the relevant supporting documents as follows:
(i) Application letter from the manufacturer that explain about refund of sales tax, penalties, surcharges, fees and any other money.
(ii) A copy of invoice and receipt.
(iii) A copy of exemption letter if applicable.
(iv) A copy of Customs Form No. 1 (for imported goods).
(v) A copy of SST-02 return.
(vi) Statement of Refund.
(vii) Other related documents as required by the DG.
Drawback of Sales Tax
The drawback of sales tax paid in respect of goods which are subsequently exported. It is the intention of the Government to promote export of the locally manufactured products by reducing the cost of production, thereby enhancing the competitiveness of such products in the global market.
A person may apply for drawback of sales tax paid in respect of goods upon exportation of such goods except petroleum. Generally, drawback of sales tax may be broadly categorised as follows:
(i) Drawback of sales tax on tax-paid finished goods, either imported or purchased from a registered manufacturer, which are re-exported;
(ii) Drawback of sales tax on tax-paid raw material and components that are used in the manufacture of finished goods for export.
Application for drawback of sales tax is allowed if:
(i) The said goods are exported within 6 months from the date on which the sales tax has been paid for the importation of taxable goods or the date of invoice for the purchase of taxable goods.
(ii) The application is made within three months from the date of export in the prescribed form jkdm 2 and supported by the relevant documents such as customs form no. 1, customs form no. 2, customs form no. 9, invoice from the registered manufacturer, sales invoices and other documents as may be required by the Director General.
(iii) The goods on which sales tax has been paid and drawback is claimed and must be declared on customs form no. 2 for export.
(iv) Payment of drawback on the class of goods to be exported has not been prohibited by regulations made under the customs act 1967.
(v) The goods have not been used after importation or after payment of sales tax.
The application of drawback required to fill in the JKDM Form No. 2 and submit the documents as follows:
(i) Customs Form No.1 or Customs Form No.9
(ii) Purchase invoice from registered manufacturer
(iii) Sales invoice to exporter
(iv) Copy of Customs Form No. 2
(v) Copy of SST-02 Statement of Sales Tax from registered manufacturer
(vi) Air waybill, sea waybill, manifest or bill of lading
(vii) Other related documents containing the particulars of import / export tax
Any person who is eligible to apply for drawback shall make an application in JKDM Form No.2 to the DG and submitted to the Cawangan Perakaunan Hasil in the controlling zone / state / station.
In the case of drawback of sales tax related to raw material and components, prior application must be submitted to the sales tax office for the use of the drawback facility. The manufacturer is required to disclose the particulars in respect of raw materials and components, the finished goods as well as the proposed formula for the computation of drawback. Visits to the manufacturing premises are usually conducted to verify the application and for purpose of confirming the formula of computation. Where the drawback involves import duty and sales tax, the claim for drawback is made together in the same form.
Application of Sales Tax Act 2018
The Sales Tax Act 2018 shall not apply to any taxable goods manufactured in the DA other than petroleum. Taxable goods manufactured and sold, used or disposed or transported in the DA other than petroleum is not subject to sales tax.
Any taxable goods imported into DA from outside Malaysia or transported to DA from Malaysia is not subject to sales tax unless they are prescribed in the Sales Tax (Imposition of Sales Tax in Respect of Designated Areas) Order 2018.
The order states that sales tax shall be charged and levied at the rate fixed under subsection 10 (2) of the Sales Tax Act 2018 on the importation of:
(i) Wine, spirit, beer, malt liquor, tobacco and tobacco products into DA;
(ii) Marble and anchovies into Langkawi; and
(iii) Motor vehicles into Tioman.
Taxable goods transported from DA to Malaysia are treated as if the goods were importation into Malaysia. Sales tax shall be payable on such taxable goods upon importation into Malaysia.
Taxable goods transported from Malaysia to DA are treated as if such goods had been exported from Malaysia or to a place outside Malaysia.
Taxable goods transported from DA to Special Area (SA) are not subject to sales tax.
The interpretation of Malaysia and special areas are as follows:
(i) ‘Malaysia’ excludes designated areas and the special areas;
(ii) ‘Special areas’ means any free zone, licensed warehouse, licensed manufacturing warehouse and the Joint Development Areas.
The Sales Tax Act 2018 shall not apply to any taxable goods manufactured in the SA.
Taxable goods manufactured and sold, used or disposed or transported in the SA is not subject to sales tax.
No sales tax shall be levied and payable on any taxable goods imported into the special areas or transported to the special areas from Malaysia unless they are prescribed in the Sales Tax (Imposition of Sales Tax in Respect of Special Areas) Order 2018.
The order states that sales tax shall be charged and levied at the rate fixed under subsection 10(2) of the Sales Tax Act 2018 on the following goods:
(i) The importation of certain goods to be used or consumed in the free zone under section 2 of the Free Zones Act 1990. The goods are as follows:
(a) Forklifts
(b) Crane
(c) Office equipment or furniture
(d) Firefighting and pollution control equipment
(e) Motor vehicles and spare parts
(f) Petroleum and petroleum parts
(g) Tyres
(h) Explosives and chemicals
(i) Air conditioning equipment
(j) Manufacturing aids
(ii) The importation of wine, spirit, beer, malt liquor, tobacco and tobacco products into Tasik Kenyir Duty Free Area.
Taxable goods transported between the SA are not subject to sales tax.
Taxable goods transported from SA to Malaysia are treated as if such goods were imported into Malaysia. Sales tax shall be payable on such taxable goods upon importation into Malaysia.
Taxable goods transported from Malaysia to SA are treated as if such goods had been exported from Malaysia or to a place outside Malaysia.
Taxable goods transported from SA to DA are not subject to sales tax.
Review and Appeal
Any person who is aggrieved with any decision made by the Director General may apply for review and revision of the decision to the Director General within thirty (30) days from the date of notification of such decision. Upon receiving such application, the Director General will make a decision within sixty (60) days or within the time practicable and notify the person.
Every application for a review to be made shall be made in Form SST-03.
Where any person is aggrieved by the decision of the Director General (including decision after review and revision), he may appeal against such decision to the Customs Appeal Tribunal within thirty (30) days from the date of the disputed decision. Any appeal must be made in a prescribed form together with a prescribed fee.
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Edited by: 浪子
Bibliography
Royal Malaysian Customs Department. (2018). Sales Tax Act 2018 - General Guide. Retrieved from
https://mysst.customs.gov.my/assets/document/General%20Guides/GeneralGuide_SalesTax_25092018-V3.pdf
Sales Tax - General Guide
Reviewed by 浪子
on
October 01, 2018
Rating:
Reviewed by 浪子
on
October 01, 2018
Rating:
