Sales tax is a tax collected by all retailers and certain service providers when they make taxable retail sale. In other words, a percentage tax on the selling price of goods and services. It is imposed by state and local governments on transactions that occur within their jurisdictions.
In Malaysia, the Sales Tax Act 1972 came into force on 29 February 1972. Sales tax administered in Malaysia is a single-stage tax charged and levied on locally manufactured taxable goods at the manufacturer’s level and as such is often referred to as manufacturers’ tax. The tax is also imposed on taxable goods imported into the Federation Sales tax is imposed on imported goods at the point of entry. In the case of locally manufactured goods, sales tax is charged and levied when such goods are sold or disposed of by the manufacturers. Taxable goods are goods of a class or kind not for the time being exempted from sales tax. Exempt goods are listed in the Schedule A of the Sales Tax (Exemption) Order 1980.
Scope of Tax
Sales Tax Act 1972 applies throughout the Federation, excluding the free zones, licensed warehouses, licensed manufacturing warehouses and joint development area. With regard to Langkawi and Labuan, special provisions have been enacted in the Sales Tax Act 1972 to accommodate their free port status.
Basis of Tax
Sales tax is levied and charged on all taxable goods imported into or manufactured in Malaysia. In this regard, goods refer to all kinds moveable properties and as such transactions involving immoveable properties fall outside the ambit of the Sales Tax Act 1972.
Administration of Tax
Unlike the Customs Act 1967 and Excise Act 1976, the Sales Tax Act 1972 is enacted for documentary control. Under such system of control, administration of tax relies significantly on the accountability of the taxable person who is duty bound to account the sales tax payable by submitting sales tax returns to the Sales Tax Authorities. Inspection of the taxable persons’ books of account will be conducted subsequent to the acceptance of the sales tax returns to ascertain the taxable person has accounted correctly all sales tax payable by him.
Unlike the Customs Act 1967 and Excise Act 1976, the Sales Tax Act 1972 is enacted for documentary control. Under such system of control, administration of tax relies significantly on the accountability of the taxable person who is duty bound to account the sales tax payable by submitting sales tax returns to the Sales Tax Authorities. Inspection of the taxable persons’ books of account will be conducted subsequent to the acceptance of the sales tax returns to ascertain the taxable person has accounted correctly all sales tax payable by him.
