GST vs SST in Malaysia: Key Differences Every Employer Should Know

Since Malaysia moved from GST to SST, businesses have had to adjust the way they handle taxes, pricing, and employee claims.

But what exactly are the differences between GST and SST? And what should employers be preparing for now? Let’s walk through everything you need to know.

What is GST (Goods and Services Tax)?

GST, or Goods and Services Tax, was introduced in Malaysia in April 2015. It was a multi-stage consumption tax.

This means GST was charged at every stage of the supply chain, from manufacturers to wholesalers to retailers, until it reached the customer.

The standard GST rate was 6%, with some essential items taxed at 0% (zero-rated).

However, GST became unpopular among Malaysians. Many felt it raised the cost of living without clear benefits. In September 2018, GST was abolished and replaced by SST.

What is SST (Sales and Services Tax)?

SST stands for Sales and Services Tax. Unlike GST, SST is a single-stage tax.

Sales tax is applied once at the manufacturing level, while service tax is charged by service providers.

The current rates are:

Sales Tax: 5% or 10%, depending on the product.
Service Tax: 6% previously, increased to 8% from March 1, 2024, for most services (except for food, beverage, telecom, logistics, and parking services).

SST was introduced to make tax compliance easier for businesses and to reduce the burden on consumers.

Key Differences Between GST and SST

Feature	GST (Goods and Services Tax)	SST (Sales and Services Tax)
Tax Structure	Multi-stage tax on every step of the supply chain	Single-stage tax on the manufacturer or service provider
Tax Base	Broad tax base	Narrow tax base
Input Tax Credit	Available to claim input tax	No input tax credits
Exports	Zero-rated, eligible for tax refunds	No complete export relief
Rate	6% or 0%	5%, 6%, 8%, or 10%
Filing	Monthly filing required	Less frequent filing
Productivity	Higher productivity	Sales tax productivity is declining

GST was more complicated but offered more opportunities for tax refunds. SST is simpler, but businesses lose out on input tax credits.

How GST vs SST Impacts Employers and HR

When Malaysia moved from GST to SST, it did not just affect product prices; it also changed internal operations, especially for HR and Finance teams.

Payroll and Employee Benefits

GST did not apply to salaries, and SST also does not. However, employee claims like hotel stays, transportation, and training sessions may include service tax under SST.

Expense Reimbursements

HR must check if reimbursed services are subject to SST. Keeping invoices and checking SST charges became important to manage company spending.

Training and Accounting

Companies had to retrain HR and finance staff to understand SST rules. Accounting software and systems had to be updated for SST filing.

Vendor and Procurement

Vendors must state if SST is included. Contract negotiations had to consider SST impacts.

Which is More Business-Friendly?

Aspect	GST	SST
Pros	Broader tax base; Input tax refunds available	Easier compliance; Lower administrative burden
Cons	Complex filing and higher administrative costs	No input tax credits; Limited export relief
Administrative Ease	More complicated	Simpler

Overall, SST is easier for businesses to manage, but GST offers better transparency and refund options.

Current Government Direction

Since SST replaced GST in 2018, there have been ongoing talks about whether GST might return.

Some government officials have shared that bringing back GST is being considered as part of long-term financial planning, especially to help increase national revenue.

However, as of now, there is no confirmed date or official decision.

For businesses, this creates some uncertainty. Even though SST is still the current tax system, employers need to stay alert.

It would be wise to follow any announcements from the Ministry of Finance or Royal Malaysian Customs closely.

If GST is reintroduced, the transition might involve updating your systems, retraining staff, and adjusting how you manage taxes with suppliers and customers.

Having good bookkeeping practices, flexible accounting software, and trained HR or Finance teams will help you adapt quickly if the government decides to bring GST back.

How to Stay Compliant with SST

Running a business under SST means understanding your obligations clearly. Here’s what employers should focus on to stay compliant:

Registration

Businesses that sell taxable goods or services and have yearly sales exceeding RM500,000 must register for SST.

The registration is done with the Royal Malaysian Customs Department. If your company misses registration when it is supposed to, penalties can apply.

Invoicing and Documentation

Every taxable sale must be supported with a proper invoice. The invoice must clearly show the amount of sales tax or service tax charged.

This not only helps during audits but also builds trust with your clients and customers.

Keeping neat and complete records for at least seven years is important to avoid trouble during inspections.

Reporting and Payment

Under SST, businesses must submit a tax return every two months, even if no tax is collected for that period.

Payment of any SST due must also be made during the same time. Late submissions or payments can lead to fines and additional penalties.

Having a regular calendar reminder or system alert helps businesses to meet all due dates without missing them.

Employee Training and Internal Awareness

Make sure your HR, procurement, finance, and sales teams understand how SST affects their roles.

From claiming expenses to issuing invoices to vendors, small mistakes can cause big compliance risks.

Short training sessions or refreshers every few months can keep everyone up to date.

Vendor and Procurement Checks

When dealing with suppliers, check if they are SST-registered and if SST is included in the pricing.

This protects your business when you account for tax properly and avoid paying incorrect amounts.

FAQ for Employers

Is SST applicable to all businesses?

Not all businesses. Only those involved in taxable goods or services and exceeding the sales threshold must register.

Do employers need to charge SST on salaries or HR services?

No, salaries are not taxable. But if a company offers HR consultancy to other businesses, those services might be taxable.

How to claim SST exemptions?

Businesses can apply for exemptions through the Royal Malaysian Customs Department, but they must meet specific conditions.

What if GST is reintroduced? What steps should HR/Finance take?

Review your current accounting and invoicing systems. Staff training and system upgrades would be needed to support monthly GST filings again.

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