Sales tax (Malay: Cukai Jualan ) is an ad valorem single stage tax imposed at the import and manufacturing levels.
The Sales Tax Act 1972 [Act 64] which makes provision for the charging, levying and collecting of sales tax came into force on February 29, 1972.
Sales tax will be charged and levied on all goods:
- manufactured locally
- imported for local consumption
except specifically exempted under Schedule A of the Sales Tax (Exemption) Order 2013, which comes into operation on January 1, 2014. The Schedule B and C of the Order provide the list of persons exempted from payment of sales tax on specified goods subject to applicable conditions.
Under the Sales Tax Act 1972, goods means all kinds of movable property. Therefore, any transactions involving immoveable properties fall outside the ambit of the Act.
Contrary to the Customs Act 1967 [Act 235] and Excise Act 1976 [Act 176], the Sales Tax Act 1972 is enacted for documentary control. Therefore, administration of sales tax depends significantly on the accountability of the taxable person who is responsible to submit sales tax returns to the Royal Malaysian Customs Department.
Sales Tax Rates
Different sales tax rates apply to different types of goods.
Primary commodities, essential foodstuffs, basic building materials, certain agricultural implements and heavy machinery for use in the construction industry are exempted.
Inputs for selected non-taxable products are also exempted.
Certain tourist and sports goods, books, newspapers and reading materials are also exempted.
Generally, all goods, including motor vehicles, are subject to sales tax at the rate of 10% under the Sales Tax (Rates of Tax No.1) Order 2012 which came into operation on October 31, 2012. However, goods imported by any person entering Malaysia or in the baggage of such person and intended for non-commercial use are exempted from sales tax. Such goods exclude vehicles, liquor, cigarettes, tyres and tube.
Certain non-essential foodstuffs, fruits, timber and building materials are taxed at 5% under the Second Schedule of the Sales Tax (Rates of Tax No. 2) Order 2012.
products, alcoholic drinks and liquor are also taxed at a standardised rate of 5% with effective from September 30, 2005.
Raw materials and machinery for use in the manufacture of taxable goods are eligible for exemption from the tax.
Computation of Sales Tax
Sales tax is to be computed and paid by:
- any taxable person who carries on a business in Malaysia, whether for profit or otherwise, in respect of taxable goods manufactured in the course of such business;
- any person who imports taxable goods into Malaysia, in respect of such goods.
Sales tax is levied:
- on the sales value at the rate in force at the time at which the sales tax is due; or
- on the quantity of goods sold, used or disposed of, or imported, at the rate in force at the time at which the sales tax is due.
Determination of Sales Value
In case of goods manufactured in Malaysia, the sales value of the goods is determined on the basis of the transaction value of the goods as the primary basis of valuation, that is, the price for which the goods are actually sold. If the sales value of the goods cannot be determined, the goods will be valued with the following order of valuation:
- the transaction value of identical goods;
- the transaction value of similar goods;
- the computed value of the manufactured goods; and
- the deductive value of the manufactured goods.
In case of goods imported into Malaysia for local consumption, the sales value is the sum of the amounts, namely:
- the value of goods for the purpose of customs duty determined in accordance with the Customs Act 1967;
- the amount of customs duty, if any, payable on the goods; and
- the amount of excise duty, if any, payable on the goods.
Sales tax will be abolished on March 31, 2015 with the implementation of Goods and Services Tax (GST) on April 1, 2015.