Penalty waived but not tax collection

PETALING JAYA: Businesses who fail to charge the expanded Sales and Service Tax (SST) come September will have to make up the uncollected tax from their own pockets.

This is because those who fail to register by August to collect the SST will still have to start taxing their clients in September even though there has been a waiver for late registrations.

“Or else, they would find it hard to recover the service tax, and busi­nesses themselves would have to account for it from their own pockets,” says tax expert Thenesh Kannaa.

“So businesses who are legally mandated to start charging the SST should just register on time even though the government has waived penalties for late registrations until Dec 31,” said the executive director of Tratax, a consul­ting firm specialising in tax, transfer pricing and SST.

He added that businesses should understand the potential impact of the expanded SST inclu­ding what is exempted to avoid paying extra costs.

“Businesses should ensure all conditions attached to an exemption are met and well-documen­ted,” he said.

On June 21, The Star reported that companies are required to make retrospective SST payments during the waiver period, even if the tax was not collected from customers. This obligation arises once firms meet the SST threshold requirements, as stipulated by the Sales Tax Act 2018 and Service Tax Act 2018, said the Finance Ministry.

A Finance Ministry spokesperson explained that the waiver period means companies will not be penalised if they voluntarily register by Dec 31.

Another tax expert Christine Koh said businesses must ensure that they pass the income threshold to start charging the SST and only register in August, not ear­lier or later.

“The government is only allowing businesses to begin charging the SST in September, so any early registration defeats this purpose,” said Koh, a partner at Owen KLCA PLT.

For businesses with multiple income streams, she stressed the importance of identifying which of their services fall under the expanded SST. This can help determine whether the incomes are assessed independently or together, she added.

Companies who already charge SST but need to charge the tax for other services they provide must also update their registration between June 24 and 30, she added. This is due to such businesses having to start charging SST from July 1.

The SST has been expanded to include more goods and services including leasing or rental, cons­truction, financial services, private healthcare, education and beauty services. Certain imported goods will also be charged between 5% to 10% under the expanded list.

Depending on sector, compani­es earning between RM500,000 to RM1.5 mil per year will have to charge the tax.