In the main dashboard of Deskera Books, click on the Products on the sidebar menu. When you’re creating a new product, you are required to fill in the fields as shown, especially the tariff code, default tax rate if your products are taxable, and if your products are non-taxable, indicate the exemption reason.
A tariff code is a code tagged to every product that is involved in global trading. It’s a product specific code as stated in the Harmonized System (HS).
Deskera Books users will have to indicate the right tariff code here and the tax rate will be auto-populated. If you click on the drop-down arrow on the tax rate column you will see different options such as:
- Exempted sales
- Some manufacturers are exempted from registration, however if they choose to register voluntarily, they are still eligible for the exemption of sales tax for input.
- Tailor, optician, engraving, vanishing table top are some of the manufacturing activities exempted from registration regardless of the turnover.
- Products that are exempted from sales tax are live animals, unprocessed food, vegetables, medicines, machinery and chemicals.
- Sales Tax @ 5%
- Products that are charged with tax rate 5% are basic foodstuffs, processed fruit juice, fruit juice, cod liver oil, etc, IT; telecommunications and printing hardware and materials, petroleum oil, construction materials and timepieces. The tax rate for oil and petroleum are subject to quantity based rates.
- Service Tax @ 6%
- The services include hotel and accommodation, car hire, rental and repair, insurance, domestic flight, legal accounting, restaurants, electricity, digital supplies, Telecoms, business consulting services. Do note that services that are imported and exported are exempted.
- However since the start of 1 Jan 2020, digital services provided but foreigners to consumers in Malaysia exceeding RM 500,000 per year will have to register for Service Tax.
- The designated areas in Malaysia such as Langkawi Island, Tioman Island, and Labuan are exempted from service-tax.
- Sales Tax @ 10%
- The sales tax, a single stage sales tax is charged by the registered manufacturers of taxable goods and on any imported taxable goods to Malaysia. The sales tax charged at 10% is the default sales tax rate in Malaysia.
- The difference between zero-rated and exempted goods is zero-rated are taxable supplies that are taxed at the rate of SST 0% whereas exempted goods are non-taxable and it’s not subject to SST.
- For any products listed as zero-supplies, the company is eligible to claim input tax credit for the materials used to build the supplies.
- Examples of zero rated supplies are basic food,sugar, water and utilities
In the next article: Learn about Malaysia Tax: What is the Schedule A, B and C all about?