No major changes seen in new SST regime

KUALA LUMPUR (July 19): The sales and services tax (SST) to be reintroduced on Sept 1 is not expected to be significantly different from the one previously in place based on the government’s projection of full-year takings, according to tax experts.

Pending more details, tax consultants anticipate the SST could be broader-based but narrower than the 6% goods and services tax (GST) which Putrajaya intends to scrap and replace with the SST that was used prior to the implementation of GST in April 2015.

At this stage, the finance ministry has yet to come out with the full details except to state that goods will be levied a 10% tax and services tax of 6%. In the interim, tax and accounting professional bodies are disappointed that they were not consulted on the draft SST bill despite their offers to assist.

Until fuller details emerge, Grant Thornton Malaysia executive director of indirect tax, and goods and services tax Alan Chung indicated that industry players would be left to surmise if the impending SST would be similar to that of the old regime.

“We have been waiting for the announcement ... [but] there have been news reports that the government may look at broadening the list of services that would be subject to service tax.

“However, judging by the fact that the government has projected that the full-year collection of SST is at RM21 billion and given that the tax rates announced are the same as the old regime, this seems unlikely.

“The last full-year collection of the old SST was about RM17 billion in 2014 and taking into account inflation over the past four years, a RM4 billion increase does not seem significant enough to indicate a broader services list that is subject to tax,” Chung told The Edge Financial Daily.

Axcelasia Inc chairman Dr Veerinderjeet Singh is also of the view that the scope of the SST would be similar to the old regime’s.

“Judging by the RM21 billion projection, the scope in terms of coverage most likely would be the same as before. There might be a little bit of widening of the tax base but certainly the scope would be narrower than GST, because the full-year revenue is half what the GST would have been,” Veerinderjeet told The Edge Financial Daily.

One possible improvement on the old SST regime, Chung said, was doing away with the various thresholds at which the service tax applied as it was confusing to manoeuvre at times.

“One of the challenges that we faced in the past was that there were various thresholds for various services. It wasn’t common across the board, for instance at a turnover of more than RM500,000 like the GST.

“My expectation is the government may look into this aspect and decide to harmonise [it] into one particular threshold for service tax, rather than having pages and pages of services that are subject to service tax,” Chung said.

Veerinderjeet, who is also the current chairman of the taxation committee of the Malaysian Institute of Accountants, the vice-president of the Malaysian Institute of Certified Public Accountants, and past president of the Chartered Tax Institute of Malaysia, expressed disappointment that professional bodies had not been consulted on the draft SST bill.

“The tax and accounting professional bodies had all offered assistance to give comments on the draft bill before it is tabled in parliament, but unfortunately we did not get that opportunity.

“It is strange that an accounting firm has been appointed to assist in the preparation of a tax legislation. Accounting firms are also tax advisers to clients, so isn’t that a conflict of interest? We [the professional bodies] are disappointed, but we are prepared to help if needed,” Veerinderjeet said.

Finance Minister Lim Guan Eng said this week that his ministry had conducted a comprehensive SST review exercise with the assistance of PricewaterhouseCoopers to simplify the tax regime.

This article first appeared in The Edge Financial Daily, on July 19, 2018.

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