Sales & Service Tax (SST) Increased to 8%

What is Sales & Service Tax (SST) ?

Sales and Service Tax (SST) in Malaysia is a critical component of the country's taxation framework. SST follows a more conventional approach by the taxation of goods and services. It essentially involves a transaction-based levy on the sale and provision of taxable goods and services. This brief overview aims to provide clarity on SST, offering businesses a foundational understanding of its implications in the Malaysian economic landscape. The domestic production and manufacturing of goods as well as the importation of taxable items into Malaysia are subject to the sales tax component of SST. Customers pay it depending on how much they spend on specific products and services. 

Only the point at which the items are sold or disposed of in the supply chain is subject to sales tax. Malaysia boasts a comprehensive tax system, encompassing various types of taxes applicable to businesses. From income tax to the Goods and Services Tax (GST), now replaced by the Sales and Service Tax (SST), businesses must navigate this intricate framework. By ensuring that organizations operate within the law, a thorough awareness of these rules helps to reduce the danger of fines and other legal consequences.

Understanding the SST Adjustment

Referring to the announcement made by the Royal Malaysian Customs Department, The Sales and Service Tax (SST) adjustment in Malaysia, shifting the service tax rate to 8% on 1 March 2024, holds several key implications for businesses and individuals. This adjustment is grounded in a specific legislative and regulatory framework, signaling a deliberate shift in the country's taxation policy. The effective date of the adjustment, along with any transitional provisions, provides a timeline for businesses to align their operations with the new tax rate.

Crucially, businesses and individuals must grasp the government's intentions behind the SST adjustment. Whether driven by economic considerations, revenue goals, or broader policy objectives, understanding these motivations enhances the overall comprehension of the tax adjustment. In essence, this section aims to equip stakeholders with a comprehensive understanding of the SST adjustment, facilitating informed decision-making, strategic planning, and effective adaptation to the new tax rate of 8% in Malaysia.

Increases in The Tax Rate Effective from 1 March 2024

Services That Remain 6%
Food and Beverages
Telecommunications
Vehicle Parking Space
Logistics (new taxable services)

Taxable Services

Taxable ServicesUp to 29/02/2024Effective 01/03/2024
Accomodation6%8%
Night Clubs, Dance Halls, Cabarets, Health and Wellness Centres, Masssage Parlours, Public Houses and Beer Houses6%8%
Private Club6%8%
Golf Club and Golf Driving Range6%8%
Betting and Gaming6%8%
Professional Services:
Comprising of Accounting Legal,
Surveying, Engineering Consultancy, Architectural Consultancy, Consultancy (Others), Training, Coaching, IT Services, Management Services (including Maintenance Management and Warehouse Management), Employement Services, Security (Guards etc.) & Digital Services
6%8%
Credit Card and Charge CardRM 25 per annumRM 25 per annum
Other Service Providers:
Insurance & Takaful (excluding life insurance)6%8%
Clearing goods from customs control6%8%
Motor vehicle repair and maintenance6%8%
  1. Hire and drive car or hire car 
  2. Charter bus
  3. Excursion bus
6%8%
Advertising Services6%8%
Electricity to domestic consumer6%8%
Domestic air transport of goods & passenger6%8%
Brokering and underwriting for financial sector only6%8%
Cleaning Services6%8%

Impact on Businesses and Pricing Strategies

The adjustment of Malaysia's Sales and Service Tax (SST) to 8%  upon Budget 2024 on 1 March 2024 has far-reaching implications for businesses, necessitating a careful evaluation of its impact and the development of strategic pricing strategies.

  • Economic Impact:
    Businesses need to analyze the financial implications of the SST increase, recognizing potential shifts in operational costs, profit margins, and overall financial health.

  • Strategic Pricing Models:
    Pricing model reevaluation is prompted by the SST modification. To absorb the increased tax rate and maintain market competitiveness, businesses must carefully adjust their pricing structures.

  • Sector-Specific Considerations:
    Different industries may experience varying degrees of impact. Understanding sector-specific dynamics is crucial for tailoring pricing strategies that align with the unique challenges and opportunities each industry presents.
  • Customer Communication:
    Transparent communication with customers is paramount. Clearly conveying the reasons behind any price adjustments, whether through educational materials or direct communication, fosters understanding and trust.

  • Adaptability and Flexibility:
    Businesses must remain adaptable and flexible in their pricing strategies. This involves anticipating market reactions, competitor responses, and potential shifts in consumer behaviour.

  • Innovation in Value Proposition:
    Consideration of innovative approaches to the value proposition becomes essential. Businesses may explore ways to enhance the perceived value of their products or services to mitigate potential resistance to price adjustments.

  • Monitoring Competitor Responses:
    Keeping a close eye on how competitors navigate the SST adjustment aids businesses in benchmarking their pricing strategies. This information can inform strategic decisions and help maintain a competitive edge.

  • Operational Efficiency:
    Exploring opportunities for operational efficiency is vital. Businesses should assess internal processes to identify areas for cost savings that can help offset the impact of the SST increase.
By comprehensively understanding the impact of the SST adjustment on businesses and implementing thoughtful pricing strategies, organisations can navigate this economic shift with resilience and maintain their competitiveness in the market.

Conclusion

In conclusion, the recent increase in the Sales & Service Tax (SST) to 8% marks a significant change in Malaysia's tax landscape. While this adjustment may pose challenges for businesses and consumers alike, it's crucial to adapt and stay informed about the updated tax regulations. By understanding the implications of the SST hike and implementing strategic measures, businesses can navigate these changes effectively and continue to thrive in the evolving market environment.

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