Accounting & Finance 101: GST v/s SST

This Tax. That Tax. What's the difference?

GST (Goods and Services Tax) and SST (Sales and Services Tax) are two different types of consumption taxes used in Malaysia.

Here are the main differences between GST and SST:

1. Tax base: The tax base of GST is broader than SST. GST is a multi-stage tax that is applied to goods and services at every stage of production and distribution, while SST is applied only to the final stage of consumption.

2. Tax rate: GST has a higher tax rate compared to SST. GST rate in Malaysia was 6% before it was abolished, while the SST rate varies between 5% and 10%, depending on the type of goods and services.

3. Applicability: GST applies to all goods and services, except those that are specifically exempted, while SST only applies to certain goods and services that are listed in the Schedule of the Sales Tax Act and Service Tax Act.

4. Administration: The administration of GST is more complex than SST. GST requires businesses to register and file returns with the Royal Malaysian Customs Department, while SST requires registration and returns filing with the Royal Malaysian Customs Department and the Inland Revenue Board of Malaysia respectively.

5. Compliance: Compliance requirements for GST are generally considered more onerous compared to SST as GST requires businesses to maintain detailed records of all transactions.

6. Transparency: GST is considered more transparent than SST because it provides a comprehensive record of all taxes paid and collected at each stage of the supply chain.

In summary, GST is a multi-stage consumption tax that has a broader tax base, higher tax rate, and more complex administration than SST, which is a single-stage tax that applies only to certain goods and services. However, SST has lower tax rates and simpler compliance requirements compared to GST.