GST vs SST in Malaysia – MyPF.

my

MyPF

5-6 minutes

Your Malaysian GST to SST guide: Know what’s happening, understand the fears, and be prepared for the
change from GST to SST which the 1st stage of implementation happening with zero-rated GST this June
2018.

Updated July 11, 2018

What is GST and SST

Goods and Services Tax (GST): is a tax on most products and services for domestic consumption at every
level in the production process. GST can be claimed as input tax for companies with revenue above
RM500k. GST was implemented in April 2015 replacing SST. GST is the most commonly used form of
taxation used by 160 / 190 countries globally. GST is also known as Value Added Tax (VAT) in some other
countries.

Sales and Service Tax (SST): are actually covered by 2 separate tax laws on a wide variety of goods and
services at a single level implemented in 1970s. The Sales Tax Act 1972 is a single-stage tax charged
typically at the manufacturer’s level. The Service Tax Act 1975 is a single-stage tax charged at the
consumer’s level except at tax free zones. The sales tax was at 10% and service tax was at 6%
respectively prior to being replaced by GST in 2015.

GST vs SST Comparison

GST Criticism

 GST has caused hardship on the people with cost of goods going up since implementation.

 Middle men have taken advantage of GST to raise prices and use tax as a convenient excuse
reason.

 For businesses, GST claim back on tax is difficult, can be declined, and requires RM500k in sales
before being claimable.

 Malaysia was able to develop and collect taxes for decades without GST.

 Some GST exempted (zero-rated) goods were not necessities but expensive items such as
lobsters.

 For dining out, GST is even charged on service charges (which was initially communicated as to
be removed).
 Political
cartoonist Zunar on GST

SST Criticism

 SST will cause government tax revenue to drop vs GST.

 SST is a less progressive form of tax and most countries have moved to GST.

 Switching back from GST to SST will cost businesses uncertainty and money (again).

Moving From GST to SST

vs

This
SST example makes certain assumptions for simplification purposes and is at 6% (instead of 10%) to
show the difference between GST vs SST at the same % tax rate.

Why is Less Tax collected with SST vs GST?

SST is at 10%. GST is at 6%. Why then is less tax collected at with SST vs GST?!
By right GST should lower taxes. However, the implementation of GST resulted in an increase of items
being taxed compounded with companies facing issues claiming back input tax (or even proceeding to
pass through additional costs at each level to consumers).

Additionally, GST is a consumer-only tax which is tax neutral for companies. SST is tax-deductible for
companies which lowers overall tax collected.

What’s the hoohah on GST to SST?

The cancellation of GST is a key part of the new government’s election manifesto. Public opinion is
generally that GST caused prices of goods and services in Malaysia to go up without the country seeing
significant benefits to the additional tax revenue collected. A key question being asked is how will the
change from GST to SST affect businesses as well as consumers?

Key GST to SST Changes

 GST will be at 0% effective June 1, 2018.

 GST act repealed July 16, 2018.

 SST to be reintroduced on September 1 2018.

 Tax shortfall estimated at RM25b.

Why 0% GST instead of GST being abolished

0% GST (zero-rated) will allow a smoother and lower cost transition from GST to SST.

Business owners still have six years to claim GST input tax (until GST fully abolished).

Additionally, parliament needs to meet and approve GST Act officially before it can be replaced by
another tax law.