Exemption from the Sales Tax under clause 99, Table B Sales Tax Order (Exemption) 1980, is a facility provided for the benefit of local factory operators that manufactures goods that are exempted from the Sales Tax which are meant for export and also on control items under the Ration Control Act 1961 which is bound under the price control to get taxed raw materials (including packaging material) excluding the sales tax.Qualification to Obtain the Sales Tax Exemption Facility
This facility is provided to provide tax exemption on raw materials and packaging materials used by local factory manufacturers to make tax exempted goods for the export market. This facility is subject to the followings: -
1) Raw materials and components are imported or purchased from a licensed factory owner.
2) Unless the goods are placed under a price control: -
a) raw materials and components must be used and exported within 6 months from the date of sales or import or extended period approved by the Director General.
b) raw materials and components and goods produced from it can’t be sold or destroyed within the Federal states unless permitted by the Director General and with the appropriate tax applied.
3) Raw materials and goods used for manufacturing: -
a) Goods that are exempted from tax meant for export; and
b) Control goods under Goods Control Act 1961, which are bound to price control.
4) The approved owner of the license must keep records and accounts related to the raw goods and components purchased or imported and the records and a sales tax officer could inspect accounts at any time.
5) The approved owner must settle all tax on any of the raw goods or componentsthat are not accountable of its use.
6) If the raw goods or components are not use and the produced goods are later not exported within a 6 months period or the exemption period as approved by the Director General from the date of purchase or imported, the owner is responsible to settle all taxes on the raw goods and components purchased or imported.
Take note that the raw goods and packaging materials are only to be used for the manufacturing of goods exempted from sales tax and is to be exported by factory owner given exemption within a period of 6 months from the date of purchase or import, unless to goods manufactured that are under the price control. Application must be made based on quantity to be used for manufacturing for a period of 6 months.
Application to Obtain Sales Tax Exemption
Every manufacturer entitled to receive the exemption must make an application to the Customs Director General at the Sales Tax office at the district where he is operating. Each application must be made using form CJ (Admin) 2 as in Attachment 1. Approval of the application will only be given after it is discovered that the applicant is the manufacturer as described under the Sales Tax Act 1972 and the goods manufactured are those that are exempted from the sales tax and is meant for export or control goods under the Control Goods Act 1961 as well as bound by the price control.
With the approval given, manufacturer are allowed to claim exemption from the sales tax on raw materials and packaging materials as described while the goods were imported or when the goods were sold to the manufacturer by a license manufacturer. Exemption must be claimed by using the certificate required under Sales Tax Order (Exemption) 1980 in Section II (as in Attachment II).
The certificate must be attached together in the import oath (Customs Form No. 1) for goods imported and is produced to the customs together with the approval letter while clearance from customs made at the place of import.
For local goods purchased from a licensed manufacturer, the certificate must be provided and manufacturer can make exemptions by producing the certificate and approval obtained to the licensed manufacturer whom will sell the goods without imposing a sales tax. The certificate will be kept by the licensed manufacturer together with a copy of the sales invoice as proof of the exemption given. The certificate can also be endorsed at the sales invoice for the same purpose.
Record Keeping and Account
Upon receiving the purchased goods or imported using the exemption, manufacturer must adhere to the terms agreed. Proper records of accounts regarding the use of the goods must be kept for inspection by a designated sales tax officer. The method used to keep the records must match the format described in Attachment III. A copy of the Customs Export Form No. 2 must be kept for verification.
Violation of Terms
If the terms are violated, the approved owner must settle all sales tax involved.
Inspection by Sales Tax Officer
To ensure that manufacturers who obtained the exemption adhere to all the terms stipulated, a sales tax officer would from time to time inspect records and usage of the exempted sales tax goods. It is important that manufacturers adhere to all the terms to benefit from the exemption.
For further information regarding this facility, do contact: -
Internal Tax Division,
Sales Tax Branch,
Royal Malaysia Customs Head Office,
Level 4 South, Block 2G1B,
Ministry of Finance Complex,
Precinct 2, Federal Government Administration Center,
62596 Putrajaya, Malaysia.
Tel.: (603) 8882 2288
Fax: (603) 8889 5869
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