12/24/21, 10:57 AM Transitioning into sales tax and service tax – clarifying the confusion | ACCA Global

1. There is no such thing as 'SST'

Firstly, candidates must appreciate that there is no tax legislation called the 'Sales and Service Tax Act'. Unlike GST, there are

two separate pieces of legislation that govern the tax regime, namely the Sales Tax Act 2018 and the Service Tax Act 2019 which
impose sales tax and service tax accordingly. 

Sales tax is a single stage tax charged and levied on all taxable goods manufactured in or imported into Malaysia.  On the other
hand, service tax is imposed on certain prescribed services called 'taxable services'. A person who provides taxable services

exceeding a specified threshold is required to be registered and is known as a 'taxable person' who is required to charge service
tax on his taxable services made to his customers.

The basis of taxation differs between sales tax and service tax as well. Sales tax is applicable to manufactured and imported

goods whilst service tax is imposed on certain prescribed services which may include goods such as food, drinks and tobacco. 
The prescribed service in relation to the sale of goods normally refers to those sales of goods which come with a service element
such as when a meal is sold in a hotel or a restaurant.

2. Multi stage vs. single stage tax

GST is a multi-stage tax where every businesses within the supply chain is required to charge GST.  Sales tax and service tax,

however, operate under what we call a single stage tax regime whereby the tax is only collected at one point in a supply chain. 

For sales tax, it is charged at the point of manufacture or importation.  Subsequently, when the goods move through the supply

chain, there is no requirement to charge sales tax anymore.  Neither a wholesaler who sells the goods to a retailer nor the retailer
who subsequently sells them to consumers are required to charge sales tax.

Notwithstanding that the wholesaler is not required to charge sales tax to the retailer, if the wholesaler has purchased the goods
from a manufacturer, the manufacturer would have charged the wholesaler with sales tax.  The sales tax cost would therefore be
embedded within the price of the goods when the wholesaler sells the goods to the retailer.

In the case of service tax, it is imposed at the stage when the services are being provided.

Being a single stage tax, the number of businesses required to be registered are a lot less and therefore,  the administrative
burden on businesses is reduced.  This is one of the key plus points of sales tax and service tax.

3. Absence of input tax credit mechanism

As GST is imposed on various levels throughout the supply chain, to avoid the multiple level of taxes, it operates an input tax
credit mechanism to allow businesses to recover the GST suffered on their purchases.  This would mean that ultimately, only the
final consumer would be the one bearing the GST.

Sales tax and service tax, however does not operate an input tax mechanism and therefore the sales tax and service tax charged
would become a cost of business to the purchaser of the goods or services.

4. SST adopts a narrow tax base approach

One key reason for the abolishment of GST is that the tax has been burdensome to the man-on-the-street as the tax regime is
broad based.  Under GST, all goods and services are taxable unless specifically zero rated or exempt.  However, the sales tax

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