KUALA LUMPUR (Aug 7): The higher sales threshold of RM500,000 would require only 27,456 manufacturers to be registered under the scope of the new sales and services tax (SST), as compared with the 32,725 manufacturers that had to register under the goods and services tax (GST) regime.

“With this, a large number of manufacturers are removed from the sales tax scope, therefore reducing imposition and administration cost to small-sized manufacturers,” Finance Minister Lim Guan Eng said.

Lim said manufacturers that met this sales threshold and were previously registered under GST, would be automatically registered by the Royal Customs and Excise Department's director-general for the new tax, while those that have yet to do so, would be required to register by Sept 1.

This sales threshold is higher than the 100,000 threshold stipulated under the previous sales tax scope, Lim reiterated when tabling the second reading of the Sales Tax Bill 2018 in Parliament today.

“The higher threshold would be applicable to manufacturers that conduct sub-manufactures, who were previously charged with a RM20,000 threshold registration [fee].

“Apart from that, tax free input benefit would be provided as per tax exemption to manufacturers, similar to the previous SST implementation. The exemption is for raw materials, components, packed items and manufacturing aids that are imported or those that are bought by registered manufacturers,” Lim said.

Consumers would absorb a lower indirect tax, where the latter would only be taxed ranging between 0%, 5% or 10%, depending on the items, he added.

“Because the sales tax is single tier tax imposed on manufacturers, consumers will only face a low tax from the rate imposed. For example, if a 10% sales tax is imposed on the manufacturer, it is equivalent to an effective rate of 6% under GST. This means that the 10% sales tax has a similar effective rate as the multi-tiered 6% GST.

“It should be noted here that if the sales tax is 5% on the manufacturer, the effective rate is about 3% under GST,” he said.

Lim also said traders need not worry about delayed input tax refunds which was the case under the GST regime, as the sales tax scheme is not based on the refund.

"We understand that the GST input tax that has yet to be refunded, affected traders' cashflow. The refund was to be paid within two weeks but two years later, there is still no refund. This problem will not happen under the sales tax," he said.

With the financial burden reduced on consumers, Lim said World Bank estimates the country's Gross Domestic Product (GDP) growth to rise 0.2%.

“This tax model would ensure that Malaysian export products are competitive, based on several benefits for registered manufacturers, including tax free input. Hence, the government expects to reach its GDP target of between 5.5% and 6% this year,” Lim added.

Items proposed to be exempted from the SST include household groceries, below 250cc motorycles, sanitary pads, baby diapers, baby food, and milk bottle, adult diapers and medical equipment for the aged, such as wheelchairs and walking stick, he reiterated.

The Sales Tax Bill, which would be debated by the parliamentarians, encompass 109 clauses and 13 parts.