SST: Simplified Malaysian Service Tax Guide

2018-09-08T15:07:40+08:00By |Business, Economy, Spending, Tax|

The new Sales and Services Tax (SST) starts this September 1st. For Service tax, which services are fully exempted and which are going to cost you more?Will you need to pay more for your credit cards and electricity? What if you run a professional services or consultancy firm?

SST Introduction

This article focuses specifically on the Service Tax portion of the SST. For information on the Sales Tax portion, refer to this article instead. 

The new Malaysian government has moved to replace the unpopular Goods and Services Tax (GST) with a new version of Sales and Services Tax (SST). Service Tax (taxable services) is a consumption tax under the Service Tax Act 2018 which takes effect on Sep 1, 2018. There are around 30 categories for Service Tax with most having a minimum threshold of RM500,000. A threshold represents a requirement for any person who exceeds the amount to be registered under the Services Tax Act 2018. A threshold of 0 (i.e. Credit Cards) means all that use a credit card/charge card will be taxed). Below is a simple yet comprehensive guide to navigate the new Service Tax in Malaysia, with infographics and lists of items by category.

Service Tax Infographic



Service Tax by Industry

CategoryService ProviderTaxable ServicesThreshold (RM)
HotelAccommodation: hotel, inns, lodging house, service apartment, homestay, etcAll services including food, drinks & tobacco products500000
RestaurantRestaurant, bar, canteen, coffee house, caterer, food court operator, eat-in, take-awayAll services including prepared/served food, drinks (alcoholic/non) & tobacco products1500000
Night ClubNight club, dance hall, cabaret, public house, beer house, health or wellness centre, massage parlour, etcAll services including food, drinks & tobacco products500000
Private ClubPrivate clubAll services including food, drinks & tobacco products500000
Gold ClubGolf club, driving rangeAll services including food, drinks & tobacco products500000
InsuranceInsurer or takaful operatorGeneral insurance/takaful B2B/B2C excluding medical insurance/takaful500000
Telco/TVTelecommunication & paid television service provider (exc provisions of services to another telco provider)Telecommunication & related services; Paid TV broadcasting services500000
Customs AgentCustoms agentServices of clearing goods from customs control500000
LawyerAdvocates, solicitors & syariah lawyersLegal services & other charges in connection to such services500000
AccountantPublic accountantAccounting, auditing, book keeping, consultancy or other professional services etc500000
SurveyorSurveyors including registered valuers, appraisers or estate agentsSurveying services including valuation, appraisal, estate agency or professional consultancy services etc500000
EngineerProfessional engineerEngineering consultancy or other professional services etc500000
ArchitectArchitectArchitectural services including professional consultancy services etc500000
Management ServicesManagement services (exc developer, JMB for strata title property, asset & fund managers)Management services & other charges etc including project management or project coordination500000
ConsultancyConsultancy services (exc R&D companies)Professional consultancy services & other charges etc500000
Employment AgencyEmployment agency (exc secondment/supplying employees & employment outside Malaysia)Employment services etc500000
Private AgencyPrivate agency (exc protection situated outside Malaysia)Provision of guards or the protection or security of person, property or business500000
Parking OperatorParking operatorProvision of parking spaces for motor vehicles where parking charges are imposed500000
MechanicOperator of motor vehicle service or repair centre or provider of motor vehicle service or repairProvision of servicing, engine repairs, tuning, changing, fixing of parts, wheel balancing, body repairs, etc500000
CourierCourier service operatorCourier delivery services for documents or parcels not exceeding 30 kilograms500000
Hired VehicleHire-and-drive passenger motor/passenger motor vehiclesProvision of hire-and-drive or hire-passenger motor vehicle services (with/without chauffeur)500000
AdvertisingAdvertising (exc promotion outside Malaysia)Provisions of all advertising services500000
Credit CardCredit card or charge card services provider (with/without annual subscription/fee)Provision of credit card or charge card services through the issuance of a principal/supplementary card0
GamingBetting and gaming provider (bettings, sweepstakes, lotteries, gaming machines or games of chance)Betting & gaming services, conducting tournaments, card/any game by casino operator500000
Electric UtilityTransmission and distribution of electricity providerProvision of electricity to any domestic consumer excluding first 600 kWh (min 28 days/billing cycle)500000
AirlineAirline operator (excluding Rural Air Services Agreement transport route)Domestic passenger air transport service and all services in connection with such services in Malaysia500000
IT ServicesInformation Technology (IT) services provider (exc sales of goods, services outside Malaysia)All types of IT services500000

Non Taxable

  • Private Hospital: Ward and food charges only in private hospital.
  • Veterinary: All veterinary services.

Exemptions

  • Restaurant exemption: Canteens in educational institution or operated by religious institution/body.
  • Insurance exemption: Insuring or takaful coverage of risks relating to the transport of passengers or goods outside Malaysia; Insuring or takaful coverage of risks incurred on granting credit relating to the export of goods, services or investments outside Malaysia; Insurance contract or takaful certificate to cover risks outside Malaysia.
  • Telco/TV exemption: Provisions of services to another telco provider.
  • Management Services exemption: Excluding management services provided by the developer, joint management body or management corporation to the owners of a building held under a strata title; asset and fund managers.
  • Consultancy exemption: Consultancy services by R&D companies; or relating to medical and surgical treatment provided by private clinics or specialist clinics; or consultancy services in connection with goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia.
  • Employment Agency exemption: Secondment of employees or supplying employees to work for another person for a period of time; or employment outside Malaysia.
  • Courier exemption: Courier delivery services for documents or parcels below 30kg each including services for documents or parcels:
    from a place outside Malaysia to a place outside Malaysia; from Malaysia to outside; from outside to Malaysia.
  • Credit Card exemption: Fuel card, charge card in closed community (e.g. education institution/sports club).
  • Airlines exemption: Air transport route as specified under Rural Air Services Agreement.
  • IT Services exemption: Sale of goods in connection with the provision of IT services; IT services in connection with goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia.
  • Outside Malaysia / Government / Statutory Body exemption: The following categories are exempted where said services if provided in connection with goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia; or any statutory fees paid to the government or statutory body.
    • Advocates and solicitors
    • Public accountant
    • Surveyors
    • Professional engineer
    • Architect
    • Management Services

Restaurant – Food & Beverages

Service tax: 6%

Threshold: 1,500,000

Know your restaurants

  • Restaurant: A place where people acquire services for meals that are prepared, cooked and served on premises or takeaway. The services that provided may include taking orders, preparing or retrieving items when ready, filling cups with beverages, and accepting customers’ payments.
  • Bar: A place where alcoholic drinks are served. This includes pub, bistro, etc.
  • Cafeteria: A restaurant in which customers serve themselves (self service) from a counter and pay before eating. This includes coffee house, canteen, cafe, etc.
  • Catering: Business of providing F&B services at any event or venue or to another business or person.
  • Drive Thru: This service may include drive through service where they allows customers to purchase products without leaving their cars/vehicles.
  • Food Truck: A vehicle equipped to cook and sell F&B that moves from place to place. The food may be prepared from scratch and pre-packaged food.
  • Retail Outlet/ Snack Bar/ Kiosk: A small store, informal restaurant or kiosk that sells and prepare smaller quantities of product for dining in or takeaway ie. light meals or snacks.
  • Hawkers/ Push-Cart: A vendor of merchandise that can be easily transported that sells a variety of food. The stall may be moveable or immoveable. The food may be prepared from scratch and pre-packaged food.
  • Food Court: A food court is generally a common area within a facility that is set apart for food concessions. It may consist of a number of vendors at food stalls or service counters.
  • Canteen: A restaurant provided by an organisation such as in school for its students, factory for its staff, etc.

Service tax levied on

  • All services including prepared or served food or drinks
  • Sale of tobacco products
  • Sale of alcoholic and non-alcoholic beverages
  • Parking Facility (excluding free parking)
  • Events/ Conferences/ Meetings/ Seminar Packages
  • Celebration Packages
  • Space for rental situated in the F&B operator premise
  • Hire of a hall for any events
  • Hire of a sports, games or recreational room
  • Car jockey services

Not subject to service tax

  • Canteen located in an educational institution
  • Canteen operated by a religious institution or body

Night Clubs etc

Know your clubs

  • Night club: Entertainment venue and bar inclusion of stage for live music, dance floor areas, and DJ booth.
  • Dance hall: Hall for dancing
  • Cabaret: Theatrical entertainment featuring music, song, dance, recitation, or drama.
  • Public house: Place permitted to sell and service intoxicating liquors and beers.
  • Beer house: Place to sell and serve beers only.
  • Health center/massage parlor: Health services and massage services are provided which is approved by the appropriate local authorities.

Private Club

Service tax levied on provision of

  • Sports or recreational services including the entitlement to use such services by club members for which membership subscription fees are charged other than golf.
  • Sale of food, drinks or tobacco products.
  • Services in the form of corkage, towel charge or cover charge.
  • Health services, which are normally provided by health centers.
  • Massage services excluding massage services provided in barber shops, hairdressing salons or beauty salons.
  • Premises for meetings or for promotion of cultural or fashion shows.
  • Parking spaces for motor vehicles where parking charges are imposed.
  • Rooms for lodging or sleeping accommodation.
  • Golf course, golf driving range or services related to golf or golf driving range

Golf Club & Driving Range

Service tax levied on

  • Green/ season pass
  • Caddy
  • Rental of golf buggy/ turf mate
  • Rental of golf equipment;
  • Guest
  • Complimentary play
  • Coaching
  • Absence
  • Competition entrance
  • Tournament
  • Lighting for night golfing
  • Night golfing
  • Practice range balls or driving range balls
  • Rental of golf shoes;
  • Subscription fees.

Telco: Telecommunication Services

Service tax levied on basic telecommunications which are the transmission of voice or data from sender to receiver.

  • Fixed network voice telephone
  • Analog/digital cellular/mobile telephone
  • Satellite Telecommunication
  • Internet and other digital data transmission
  • Network component rental, sales and service
  • Network access and network facilities
  • International telecommunication basic infrastructure
  • Wireless paging
  • Resale of basic telecommunication

Service tax levied on value-added services, for which Telco adds a value to the telecommunication services.

  • Fixed telephone network value added services
  • Mobile network value added services
  • Satellite network value added services
  • Internet value added services
  • Other data transmission network value added services

TV: Paid Television Broadcasting Services (PTBS)

Service tax: 6%

Service tax levied on

  • Supply of TV package to customers
  • Supply of Satellite TV Box / Set-top box (STB)
  • Change/Upgrade of package
  • Installation/re-installation (reactivation) fee charged to the recipient
  • Repair charges

Customs Agent Services

Service tax: 6%

Provision for clearing of goods from customs control by customs agent which is a prescribed service, the value of the taxable service for the charges of service tax is the actual price of services charge to his clients at point of services rendered.

Courier Services

Service tax: 6%

Service tax levied on

  • Service provider licenced under Section 10, PSA 2012
  • Domestic courier service
  • Service provider registered under Service Tax Act 2018 (STA 2018)

Not subject to service tax

  • Postal services by Pos Malaysia Berhad by way of sending letters that require postage stamp including bulk mailing and franking machine

Hired Vehicles (Hire-and-Drive)

Service tax: 6%

Service tax levied on

  • Vehicle rental fee (time / mileage)
  • Driver service fee (vehicle for hire)
  • Drop off / delivery charges (charges imposed on returning rental cars elsewhere from where they were taken.)
  • Child-seat or booster-seat rental.
  • Fuel surcharge
  • Insurance charged by the operator
  • etc

Not subject to service tax

  • Summons
  • Car wash

Credit Cards

Service tax: RM25 per card

Service tax imposed on date of issuance or renewal of credit/charge card OR every 12 months after the date the card is issued or renewed. Service tax is inclusive for co-branded cards. Service tax excluded for debit card, fuel card, charge card in private community, loyalty card, and electronic money (e-money/e-wallet). If an old card is reused/reinstated, service tax shall be imposed on the date the new card is issued. Service tax is imposed even if used in (duty-free zones) likes Langkawi, Labuan, Tioman, Setulang Laut or Pengkalan Kubor.

Airlines (Domestic Flight)

Service tax levied on

  • From a place to and within Malaysia including between Sabah and Sarawak
  • Ancillary services: excess baggage, seat selection, lounge access, meals on board, fuel surcharge, basinet, wifi-on-board, class upgrade, insurance, other charges/fees, etc
  • Wet charter (with crew)
  • Private jet

Not subject to service tax

  • International flights inbound/outbound
  • Rural Air Services (RAS): operated via MASwings with 49 RAS routes
  • Sales of goods and services (except food & beverage)
  • Penalty for cancellation
  • Dry charter (without crew)
  • Freight transportation (re: Courier Services)
  • Intragroup Shared Services
  • Vouchers (compensation by airline)
  • Loyalty proramme
  • Free services
Source: Royal Malaysian Customs Department. Information shared as a simplified reference based on information at time of preparation. Please check the official Customs website (customs.gov.my) for full and complete information. E&OE.

More Info

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25 Comments

  1. Evonne August 31, 2018 at 10:23 am - Reply

    Can I clarify that pertaining the ‘Display price must be in nett as per Single Pricing Policy with clause on inclusion of taxes’? Shall all the pricing comes with nett selling price which include SST% for everything which taxable?

    Hi Evonne, Yes the pricing should be the final pricing including tax.

  2. Alex September 14, 2018 at 3:12 pm - Reply

    Hi! Does the Service Tax applies for training providers and HR advisory companies?

    Hi! Yes if it falls under consultancy.

  3. Jeff September 14, 2018 at 6:59 pm - Reply

    Hi there, my company provides training as a training provider to company. Would this fall under management services? Thank you so much for your great advice

    Hi Jeff, yes would be likely subject to SST under consultancy. Keep up the great work with Madlab!

  4. Ling September 20, 2018 at 12:42 pm - Reply

    Hi, is education exempted from service tax? For example, kindergarten business.
    Thanks!

    Hi Ling, education/kindergartens should be exempted.

  5. WongCY September 20, 2018 at 4:15 pm - Reply

    Hi! Is Service Tax applicable to Employment Service for LMW status company?

    Hi WongCY, for LMW we are unsure. You may want to check directly with customs.

  6. FAS September 25, 2018 at 1:21 pm - Reply

    any guidedance for itemise billing for event management services

    Hi Fas, for itemised billing details to make sure you may want to check with tax authorities directly or engage a tax consultant.

  7. Sam Ishak September 27, 2018 at 3:11 pm - Reply

    Hi! Is Service Tax applicable to Management Service for Real Estate Investment Trusts (REITs) status company?

    Hi Sam! As property management service should be tax exempt. Do check with tax authorities to confirm classification.

  8. Cheah October 10, 2018 at 9:01 am - Reply

    Hi there, is real estate agents/agencies subject to SST?

    Hi Cheah, as a real estate service you will be subject to SST. Some agents have chosen to absorb the charges while some pass it down to clients.

  9. Chad October 11, 2018 at 7:14 pm - Reply

    Is there any extension allowed when changing from GST to SST for a company? For example, can you still transact in GST if you are in the process of switching to SST?

    Hi Chad, for goods and services sold after Sep 1, 2018 it must be subject to SST.

  10. Apple October 21, 2018 at 3:44 pm - Reply

    Hi, is Sales IT Goods retailer exempted from service tax? Example selling laptop and computer shop without service.

    Hi, Subject to sales tax.

  11. Muslim MI
    Muslim MI October 23, 2018 at 2:17 pm - Reply

    Service contract signed before May 2018 indicate client to pay GST. Client now refuses to pay SST because contract specifically states GST. What can be done, or is there guideline for automatic change from GST to SST in existing contract clause?

    It depends on the timeline of the service provided and the billing date. In short, client is required to pay. Can check with customs on how to address this issue with client.

  12. Lean Wenn Cheah
    Lean Wenn Cheah October 25, 2018 at 9:46 am - Reply

    Hi
    Would like to ask is IT services like Webpage layout and design, Webpage coding, Copywriting subject to service tax?

    Hi
    Yes IT services subject to service tax. Please check with tax authorities to confirm.

  13. vignes October 30, 2018 at 11:08 am - Reply

    I received a swift transfer from india for a work carried out in malaysia for insurance survey purpose. Is the remittance amounting to USD 1491 (MYR 6232) taxable i.e 6%SST imposed ?

    If it’s outside Malaysia, it should not be subject to tax.

  14. Nad November 22, 2018 at 10:42 am - Reply

    If we sale of company asset such as we dispose company’s car, do we need to charge SST upon sale of those assets?

    Hi, SST should not be required for disposal of company asset. Suggest to check with your tax professional. If you need a tax professional, we can recommend one for you.

  15. zuraini November 24, 2018 at 5:09 pm - Reply

    Hi

    Our full wedding package among others inclusive hall rental for the wedding venue. Should we include hall rental charge to the customer to calculate the threshold of 1.5mil?. Thanks.

    Hi, if you’re billing the client directly for it then it should be included.

  16. Vincs January 17, 2019 at 11:55 am - Reply

    Hi,

    For wedding package signed during GST period (March 2018, actual day of wedding on Jan 2019), partial payment (RM 20,000 out of RM30,000) made during Tax free period (0% GST and SST)

    How should the SST of the Hotel be calculated? Will it only imposed to the balance of RM10,000? Or it will crawl back and charge the full amount of RM30,000?

    Cheers

    Hi, it depends on how the hotel records the charges. If recorded under tax free period it should not be subject to GST and SST.

  17. KSLAI
    KSLAI February 21, 2019 at 3:18 pm - Reply

    Hi I need clarify on your statement below and General Guide on disbursement. The exemption might be conflict each other. Does I need to comply with the disbursement clause ?

    Malaysia / Government / Statutory Body exemption: The following categories are exempted where said services if provided in connection with goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia; or any statutory fees paid to the government or statutory body

    Thanks

    Hi KSLai, Can you please share more on the potential conflicting clause and your scenario?

  18. KSLAI
    KSLAI March 4, 2019 at 12:00 pm - Reply

    HI I refer to the General Guide on disbursement stated as below
    Payment to third party or on behalf of the principal will be treated as disbursement if the registered person fulfils all the following criteria:
    (i) Incur expenses on behalf of the client;
    (ii) The client is the recipient of the services (invoice is in the client’s name);
    (iii) The payment is authorised by the client;
    (iv) The client knew that the services is made by a third party;
    (v) The exact amount is claimed from the client and has no right to alter or add on the value of the services;
    (vi) The payment is clearly an additional to the services made to the client.

    In the exemption given to any statutory fees paid to the government or statutory body, all the receipt or invoice issue by the statutory body its not under the client name as per item no. (ii)

    My issue which to follow ?

    Thanks

    HI KSLAI, as the scenario would be complex, you will want to discuss with the relevant authorities for your specific scenario.

  19. kathy March 22, 2019 at 11:01 am - Reply

    Hi sir

    May I know if car dealer earns agent fees from agents, is the agent fees billed to agents subject to 6% service tax?

    Hi Kathy, yes should be subject to 6% service tax. Do check with customs to confirm for your scenario.

  20. Kee March 26, 2019 at 5:50 pm - Reply

    Can i know that imported service tax, online service from oversea subscription fee need to subject to 6% service tax start from Jan 2019?

    Hi Kee, implementation of online service tax including software, music, video and digital advertising is effective Jan 1, 2020 according to MoF

  21. James April 2, 2019 at 11:17 am - Reply

    Company borrow staff to other company. The staff monthly salary is RM2,000 and back charge to other company with salary RM2,000.

    Kindly advise whether the monthly salary RM2,000 back charge to other company is subject to service tax?

    Hi James, should not be subject. But do check with tax authorities as may depend on your specific scenario.

  22. TCH April 5, 2019 at 9:20 pm - Reply

    Hello
    Can I know whether provision of sauna services for customers and selling sauna units are subject to sst? If our company voluntarily register for sst, does this mean we hv to start charging sst from day one of services even if we hv not exceeded 500k threshold?

    Hello TCH, yes subject to SST. Would only be for threshold above 500k.

  23. wong April 18, 2019 at 11:37 pm - Reply

    Hi, i m in real estate agency, may i know sub sales (second hand)subject service tax or not?

    Hi Wong, no not subject to SST for the property itself. SST however is chargeable for all services provided in relation.

  24. chan April 30, 2019 at 3:55 pm - Reply

    May I know purchase software license from oversea then sell to reseller, retailer need to declare Imported Taxable Service?

    Hi Chan, It depends on how the software is sold. Do check with tax authorities especially whether withholding tax will be applicable. Also if it falls under the new digital services tax.

  25. Chinhui Ang June 20, 2019 at 9:02 am - Reply

    Does sponsorship subject to 6% SST?

    Hi Chinhui, what sponsorship are you referring to? For selected sponsorship would be tax exempt.

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