12/24/21, 11:21 AM Transitioning into sales tax and service tax – clarifying the confusion | ACCA Global

and service tax regime impose tax on certain goods manufactured and imported in Malaysia and certain prescribed services
only.  With this, consumers should see cheaper consumer prices on the goods and services.

5. Tax rates
GST adopted a single rate of tax i.e. 6%, whilst sales tax and service tax have a standard rate of 10% (with some goods at 5% or
exempt) and 6% respectively. 

Even though the sales tax is higher at 10%, this does not necessarily mean that the goods suffer a higher incidence of tax.  This
is because the imposition of sales tax is at the earlier stage of the supply chain when the sales value is expected to be a lot lower
as compared to GST which is imposed at all levels up to the retail price.

Let’s go through an example to illustrate the interaction of both sales tax and service tax.

EXAMPLE

Ali Engineering Sdn Bhd (AESB) is principally involved in the provision of engineering services with an annual turnover of RM3
million.  It purchased computers from a local trading company as well as imported a design machine from Singapore.  It also

procured accounting services from Baba & Co, a service tax registrant.  Outline the sales tax and service tax implications of the
various transactions.

Answer

AESB is required to be registered as a taxable person for service tax purposes as the provision of engineering services is a
taxable service and it has exceeded the registration threshold of RM500,000.  As such, AESB will be required to charge and
collect service tax in relation to the engineering service fee invoiced to its customers. 

The purchase of computers from a local trading company is not subject to sales tax as sales tax is only applicable if AESB
purchases them directly from a manufacturer or imports them.

The importation of the design machine from Singapore is subject to sales tax even though AESB is not a sales tax registrant. 
The sales tax will be collected at the point of importation, when clearing the goods from Customs.

In respect of the accounting service provided by Baba & Co, Baba & Co will charge service tax on the accounting fee invoiced to

AESB.

The sales tax payable on the importation of the design machine as well as the service tax payable on the accounting service fee

will become a cost of business to AESB.  These are not recoverable against the service tax charged by the company on the

engineering service fee to its customers.

Sales tax and service tax concepts

To facilitate the understanding of the basic features applicable to sales tax and service tax, the table below seeks to summarise
the key points:

Key features Sales tax Service tax

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