Sales Tax Amendment Act Malaysia: Impact On Businesses and Consumers

The ambit of the Sales Tax Act 2018 has been increased, and additions have been made to the existing provisions. By announcing the Sales Tax Amendment Act 2024, the Malaysian government has expanded the preceding Sales Tax Act 2018 scope.

These amendments have been proposed to improve government tax compliance and revenue. However, this leads to increased costs for consumers and operational adjustments for businesses. This guide comprehensively explains key amendments and how they impact businesses and consumers. 

Key Amendments Introduced in Sales Tax Amendment Act 2024

There have been several changes in the SST Act Malaysia, impacting both consumers and businesses. Here’s a brief of them: 

Sales Tax (Low Value Goods) (Amendment) Regulations 2023 

These amendments have come into effect from January 1, 2024. Here are the amendments made 

New Regulation on Credit and Debit Notes (6A): 

• Registered sellers of low-value goods must issue a credit or debit note when the sales tax is reduced or added. This applies when the rate of sales tax changes or is adjusted during business.
• The credit or debit note must include the type (credit or debit) clearly stated. The serial number, date of issuance, seller/buyer details, reason for issuance, description of the goods, the sales tax rate and amount, and reference to the original invoice are also included.
• The seller shall include the sales tax adjustment, addition, or deduction, in the return for the taxable period in which the credit or debit note was issued when he is still registered. 
• The adjustment shall be made on the return for the last taxable period during which the seller was registered if he is no longer registered.

Amendments in Return Submission

• Under Rule 7, sellers must now submit their sales tax returns in the form and manner prescribed by the Director General, easing the process under the new law.

Sales Tax (Compounding of Offences) (Amendment) (No. 2) Regulations 2024

These amendments have been in effect from December 1, 2024. 

Amendments to the First Schedule

Insertion of section 49A(3) in paragraph (a) of the First Schedule and insertion of sub-regulation 17A(6) in paragraph (b), prescribing additional penalties in respect of retail offenses.

Addition of Subsection 49A(3)

The amendment introduces a new subsection 49A(3) to the First Schedule, providing approvals for the sale of certain goods to increase control over the selling of restricted items.

Penalties Related to Retail-Related Activities

Subregulation 17A(6) is inserted and provides for penalties against a business for retail-related offenses to strengthen compliance in retail-related activities.

Sales Tax (Amendment) Regulations 2024

These amendments will be effective from December 1, 2024.

• Retail Trade Rules: This rule sets out the specific compliance requirements for retailers who declare the retail sale of goods under subsection 49A(1) of the Sales Tax Act.
• Application Requirement: Retailers will make written applications to the Minister accompanied by supporting documentation as regards the goods they seek permission to sell. 

Conditions for retailers upon approval: 

1. Must operate an electronic system to electronically record all transactions including invoices, receipts and reports about their retail sales.
2. Cannot delegate approval to another person or business
3. Must allow the Director General at all times to inspect the stocks
4. Must inform the Minister immediately if there are any changes in the approval details or circumstances

Revocation and Penalties
The Minister may revoke approval if conditions are violated. Non-compliance may be punishable with a fine not exceeding RM 50,000, imprisonment not exceeding 1 year, or both.

Sales Tax (Amendment) Act 2024 (Act A1718) (Effective Date to Be Appointed by Gazette)

The Sales Tax (Amendment) Act 2024 has introduced quite some significant changes that will impact businesses, especially those dealing in goods manufactured, sold, or transported to and from Pulau 1. Here is a breakdown of key amendments.

• Amendment to Section 2: Insertion of Pulau 1 in the Definition of "Designated Areas"
• Amendment to Section 49: Under this amendment, goods produced in Pulau 1 shall be subject to sales tax, with an exception for those that the Minister has exempted.
• New Section 49A – Retail Trade in Pulau 1: This new section makes it an offence to undertake the retail sale of declared goods in Pulau 1, except with prior approval from the Minister.
• Application for Approval: Retailers must apply for permission to sell such goods. Non-compliance will be severely penalized, with an offense punishable by a fine not exceeding RM 50,000, imprisonment not exceeding 3 years, or both.

Amendment to Section 50: Sales tax on goods imported to and from Pulau 1
Sales tax is payable on all goods imported into Pulau 1 or brought from Malaysia, designated areas or special areas into Pulau 1 unless exempted by the Minister.

Goods moved from Pulau 1 to Malaysia will be treated as imports and subject to sales tax, but goods moved between Pulau 1 and other designated or special areas will be exempt from sales tax.

Amendment to Sections 54 and 57

Clarification on Transferred Goods—These amendments will clarify how the sales tax applies to goods being transferred into and out of Pulau 1, providing certainty to importers and retailers dealing with cross-border transactions.

Impact of Sales Tax Amendment Act 2024 on Businesses

• Stricter criteria are imposed for retailers to seek approval from the Minister to sell designated goods.
• Retailers must keep electronic records of all transactions and make stocks available for inspection by the Director General.
• Non-compliance with the new conditions of approval can be punished with a fine not exceeding RM50,000, imprisonment not exceeding three years, or both.
• Businesses will need to charge sales tax on goods moved to and from Pulau 1, unless exempted.
• The SST Act Malaysia 2024 imposes duty-free sales in Pulau 1, but they must comply with the sales tax legislation for cross-border sales.

Impact of Sales Tax Amendment Act 2024 on Consumers

• Due to sales tax, consumers may have to pay more for goods imported to or from Pulau 1 unless exempt.
• To enjoy duty-free products, consumers must present receipts that prove they have been at Pulau 1 for at least the minimum period.
• Duty-free products ranging from liquor to cosmetics will be offered in Pulau 1, with a promise of savings.
• Some products are only sold to specific retailers, leaving consumers with fewer choices.

Conclusion 

The Sales Tax Amendment Act 2024 introduced significant changes for businesses and consumers alike, increased compliance requirements, and expanded taxable services.

While businesses have to balance new reporting challenges and operational aspects, consumers might face increased prices for certain goods and services. Therefore, businesses and consumers must stay up-to-date with the recent amendments to ensure a smoother transition.