Following the zero-rating of Goods and Services Tax (“GST”) beginning 1 June 2018, our Finance Minister has announced that the government will reintroduce the Sales and Services Tax (“SST”) with a rate of 10% for sales and 6% for services, with the bill expected to be passed in Parliament next month.

To recap, both the GST and SST are consumption taxes, one of the main differences being GST is imposed at every level of distribution from the manufacturer, wholesalers, retailers to consumers whereas SST is a single stage of consumption tax which is only imposed at manufacturer or consumer level.

However, under the GST regime, the paid input tax are claimable by each level of businesses and the tax is ultimately borne by the final consumer. In contrast, for SST, the tax paid on the purchases often cannot be recovered by businesses and SST is often treated as a cost to business.

What will happen next?

Consumers may have noticed a reduction in prices and enjoyed substantial savings ever since GST has been zero-rated.

The effect on the reintroduction of SST remain uncertain for now, and understandably the rakyat’s primary concern is whether the reintroduction of SST will cause the retail prices to spike or to fall.

The answer to that will really depend on a number of factors, such as the range of products or services that are covered under the SST regime, whether there are any tax exemptions made available by the government, as well as how individual businesses decide on whether to ‘pass on’ the tax. For example, prior to GST being first introduced in April 2015, telco operators passed on the SST to postpaid customers but absorbed the SST for the prepaid users.

When GST was introduced and implemented, a range of items and services that were not previously subject to any taxes became subject to GST, such as interbank ATM withdrawals and parking fee with the Touch ‘n Go card.

For now, we will have to wait for the specific SST legislation to be rolled out to get more clarity on the impact of the reintroduction of SST. Nevertheless, business owners should begin preparing for their systems and finances in anticipation of the looming reintroduction of SST.


This article was written by Shawn Ho and Ee Lyne Chong from our corporate, property and tax practice group.  Our corporate team advises on legal compliance, corporate governance, shareholder and founder arrangements, joint venture and partnership structures and corporate tax matters


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