GST and Service Charge in Malaysia

Updated:

GST was reduced to 0% on 1 June 2018 and was replaced with the Sales Tax and Service Tax starting 1 September 2018. The Sales Tax is levied at the import or manufacturing levels, and companies with a sales value of taxable goods exceeding RM500,000 in a 12-month period are liable to be registered for the tax, which is levied at rates varying from 5% to 10% depending on the goods in question.

Old post:

Still remember a long time ago in the college learning how to do Accounting for GST and our lecturer told us that we will have the competitive advantage when the GST is implemented in Malaysia in the future. Now the time has come but unfortunately, I am not in the Accounts field anymore. :)

As you all probably know, the GST was implemented effectively on the 1st April 2015 in Malaysia at the rate of 6%. While GST is supposed to reduce the indirect tax and subsequently, the prices of goods and services will be reduced, I find that most of the prices of the goods and services have actually increased in Sabah.

Actually, only businesses with annual sales turnover of RM500,000 and above are liable to be registered under GST. Those below RM500,000 threshold are not liable but they can also register for voluntary registration. Some businesses do that to avoid having to absorb the GST on their expenses and purchases so that they can be more competitive.

Apart from GST, businesses such as hotels and restaurants can continue to collect 10% service charge from the customers provided there was a collective agreement (CA) between the empoyers and the workers and they are also advised to display a notice informing the consumers on the service charge imposed in their outlets. While the minimum wages are set at MYR 800, there are still many workers earned less than half of it so the service charge is necessary to meet the minimum wages for the workers.