SST and e-invoice: what business needs to know

If you sell taxable goods or provide taxable services in Malaysia, you may need to register for and charge Sales and Service Tax (SST). SST is not a single tax rate that applies to every business. Whether you need to register, what rate you charge and how you report it depend on what you sell and how your business operates.

What is SST?

SST stands for Sales and Service Tax. It is administered by the Royal Malaysian Customs Department. There are two parts:

• Sales Tax applies mainly to taxable goods manufactured in Malaysia or imported into Malaysia. It is generally a single-stage tax.

• Service Tax applies to prescribed taxable services provided in Malaysia by a registered person. Imported taxable services can also be subject to service tax.

This means simply having a business in Malaysia does not automatically make you an SST-registered business. Your business activity matters.

Does your business need to register for SST?

It depends on what you sell and your taxable turnover.

• For sales tax, a manufacturer of taxable goods generally needs to register when the value of taxable goods sold exceeds RM500,000 in a 12-month period. Voluntary registration may also be available to eligible manufacturers below the threshold.

• For service tax, the registration threshold depends on the type of taxable service. There is no single threshold that applies to every service.

For example, rental or leasing services have a RM500,000 threshold, while certain newly taxable services such as construction and private healthcare use a RM1.5 million threshold. So before checking your revenue alone, check whether your particular goods or services fall within the taxable scope.

What is the SST rate?

The rate depends on what you sell.

• For sales tax, taxable goods are generally subject to 5%, 10% or a specific rate, depending on the goods and applicable classification.

• For service tax, the standard rate is 8%. Certain services, including food and beverage, logistics, telecommunications and parking, remain at 6%. Some newer taxable services also have specific rates, such as construction and private healthcare at 6%.

Because SST rates and taxable scopes can differ by industry, don't assume that another business's SST rate applies to yours.

How does SST affect your invoice?

If you are SST-registered and your sale or service is taxable, the applicable SST needs to be reflected in your invoice and accounted for in your SST return. Your accounting records should therefore distinguish between:

• Taxable sales or services

• Applicable SST rate

• SST collected

• Exempt or non-taxable transactions

• SST adjustments, where applicable

How do you report and pay SST?

Registered businesses generally submit their SST return through MySST. The standard taxable period for SST is every two months, and the tax collected is reported and paid to the Royal Malaysian Customs Department. Your accounting records should give you a clear view of the taxable transactions and SST amounts for each reporting period before you submit the return.

SST and e-invoice are not the same thing

This distinction is important. SST is an indirect tax administered by Customs. E-invoice is a transaction reporting and validation system administered by LHDN.

If your business is subject to both, you need to manage both requirements. SST information may also form part of the data included in your e-Invoice. Your accounting system should therefore keep your sales, tax and customer information consistent across both processes.

Managing SST with Duitbooks

With Duitbooks, you can record your sales and purchases with the applicable tax information while keeping your accounting records and e-Invoices in the same system. Your SST information stays connected to the transactions that generated it, making it easier to track taxable sales and prepare your records for SST reporting.

Before charging SST, make sure you have confirmed three things:

• 1. Is your product or service taxable?

• 2. Has your business reached the applicable registration threshold?

• 3. Which SST rate applies to your transaction?

SST rules vary by industry and are updated from time to time. Check the latest MySST guidance for the treatment that applies to your business.