In this blog, we’ll explore the Goods and Services Tax (GST) and the Sales and Services Tax (SST) in Malaysia. You’ll learn what SST is, how it replaced GST in 2018, and the key differences between these tax systems. We’ll also delve into the current SST rates, the process of calculating SST, and the impact of both GST and SST on restaurant owners. If you’re a novel restaurant owner then this is the perfect guide for you to get educated about the taxing system in Malaysia. This will help you in being compliant with the complex tax laws.
What is SST in Malaysia?
SST was reintroduced in place of GST in 2018 it is a single-stage tax that is levied at the final point of sale of goods or the final point of service delivery for services. It has 2 components service tax and sales tax.
Sales tax – applies to all those taxable goods that are manufactured in or imported to Malaysia.
Service tax -refers to that tax that is levied on services offered by taxable people in Malaysia.
Goods and service tax in Malaysia
GST also known as goods and service tax was introduced in 2015 in Malaysia. It is a multistage tax that was implemented in place of Sales and service tax in Malaysia. It is levied at every stage of consumption as compared to SST which used to be levied at one stage either at the manufacturing or at the consumption stage. Businesses collect GST on behalf of the government it is a type of indirect tax that is paid by people.
GST vs SST in Malaysia
How to Calculate SST in Malaysia?
Current SST rate in Malaysia – Currently the Sales and service tax in Malaysia is 8%.
Restaurants are considered taxable for the services provided by them. If the restaurants have more turnover than RM 500,000 then they are eligible to pay the service tax.
For example, if the Turnover of the restaurant is RM 500,000 and the rate is 8 % then
500,000 * 0.08= 40,000
The restaurants have to pay 40,000 as the SST for that month to the Malaysian Government.
Impact of GST and SST on Restaurant Owners
GST
During the GST era restaurant owners were able to collect an additional 6 % on the bill which was passed on to the customers. They used to claim input tax credits on this and the margin was much higher as this was collected on multiple stages.
It required detailed accounting and reporting at every stage and restaurant owners had no option but to employ specialized accountants for this purpose.
The addition of GST on customers’ bills was discouraging for them it can impact their spending behavior in a negative way.
SST
Since SST is a single-stage tax the profit margins are much lower than usual and the restaurant owners won’t be able to claim input tax credits on this. Which makes it difficult for them as the profit margins are much lower than usual. They have to adjust the pricing of the menu items to be profitable.
SST is simple to understand and comply hence the administrative burden of restaurant owners is reduced because of this.
The single-stage nature of this tax has a lesser burden as compared to GST and doesn’t make them feel overwhelmed by the tax.
In summary, we explored the key aspects of the Sales and Services Tax (SST) and the Goods and Services Tax (GST) in Malaysia. SST, reintroduced in 2018, is a single-stage tax with separate sales and service components. GST, implemented in 2015, was a multi-stage tax covering every consumption stage. We also compared their impacts, especially on restaurant owners, detailing the calculation of SST and current rates. Understanding these tax systems will help you navigate compliance and pricing strategies effectively.
