GST Model - Differences between GST and SST

It is proposed that Goods and Service Tax (GST) is replacing the current Sales Tax & Service Tax (SST). Although it has been postponed, there are quite a few things that you should understand it beforehand - especially for Corporates.

First of all, the concern for business persons is: Rate. The rate of 4% is proposed to replace different rates in different categories of SST. In short, the rate is fixed. The rule of thumb would be:

GST is charged on the taxable supply of goods and services made by a taxable person in the course or futherance of business in Malaysia.

 Of course, it applies to any important goods or services as well.

Despite the lower of tax rate, GST will be a multi stage consumption tax compare to SST. For example, under current SST system, if a taxable supply (goods or services) is sold by a taxable person, a tax of 5 - 10% of the invoice amount will be chargeable to the first buyer. First buyer will pay the tax and if he re-sale the item then no further SST to be imposed. This means that SST is a single stage of consumption tax compare to GST.

The differences were being summarized as following:

• Taxable Period - In SST it is always 2 months, but in GST it will varies between 1 month, 3 months or 6 months.
• Return filing deadline - 28th day after the end of taxable period for SST (i.e. for taxable period from Jan - Feb, filing deadline will be 28th of March). For GST, it will be the last day of the month after the end of taxable period (i.e. if taxable period is one month - March, deadline will be 30th April and so on).
• Penalty for late payment - SST will charge a penalty of 10% on originally overdue amount for every 30 days for the maximum of 50% (which max is 5 times) and GST will imposed a penalty for 5% on the originally overdue amount for the first 2 times and 3% for the next 5 times which represent a maximum of 25%.
• Tax free inputs - SST is allowed for raw materials and components only, but GST allowed for all business inputs and offset against output tax in the GST return.
• Treatment of exported goods: SST - no tax on exports, while GST - all exports are zero-rated.
• Compound: SST - maximum of RM5,000 and GST - Maximum half of the fine prescribed for offence.

The above will allow the public a brief understanding on how GST works and the differentiation compare to SST. There will be more to understand - i.e. When to charge GST, How to charge and pay GST, What to charge GST, and Who can offset the paid GST and received GST.