Concept Of Tax:
The Sales Tax Act 1972 came into force on 29 February 1972. Sales tax administered in our country is a single-stage tax charged and levied on locally manufactured taxable goods at the manufacturer’s level and as such is often referred to as manufacturers’ tax. The tax is also imposed on taxable goods imported into the Federation Sales tax is imposed on imported goods at the point of entry. In the case of locally manufactured goods, sales tax is charged and levied when such goods are sold or disposed of by the manufacturers.Taxable goods are goods of a class or kind not for the time being exempted from sales tax. Exempt goods are listed in the Schedule A of the Sales Tax (Exemption) Order 1980.
Sales Tax Act 1972 applies throughout the Federation, excluding the free zones, licensed warehouses, licensed manufacturing warehouses and joint development area. With regard to Langkawi and Labuan, special provisions have been enacted in the Sales Tax Act 1972 to accommodate their free port status.
Basis Of Tax:
Sales tax is levied and charged on all taxable goods imported into or manufactured in Malaysia. In this regard, goods refer to all kinds moveable properties and as such transactions involving immoveable properties fall outside the ambit of the Sales Tax Act 1972.
Administration Of Tax:
Unlike the Customs Act 1967 and Excise Act 1976, the Sales Tax Act 1972 is enacted for documentary control. Under such system of control, administration of tax relies significantly on the accountability of the taxable person who is duty bound to account the sales tax payable by submitting sales tax returns to the Sales Tax Authorities. Inspection of the taxable persons’ books of account will be conducted subsequent to the acceptance of the sales tax returns to ascertain the taxable person has accounted correctly all sales tax payable by him.
Every person engaging in the manufacturing of taxable goods in the course of business is required to apply to be licensed as a licensed manufacturer. To determine whether a person is subject to such licensing requirement, it is pertinent to ascertain that his operation complies with the definition of ‘manufacturing’ and the product arising from the operation is taxable.
‘Manufacture’ is defined under section 2 of the Sales Tax Act 1972 and means, in relation to goods other than petroleum, the conversion by manual or mechanical means of organic or inorganic materials into a new product by changing the size, shape or nature of such materials and includes the assembly of parts into a piece of machinery or other products, but does not include the installation of machinery or equipment for the purpose of construction.
This licensing requirement enables the Sales Tax authorities to identify and bring into the tax net the manufacturers who come under the jurisdiction of the Sales Tax Act 1972. A manufacturer holding a sales tax licence is called licensed manufacturer.
A person who manufactures taxable goods without a sales tax licence shall be guilty of an offence under section 43 of the Sales Tax Act 1972 and liable to imprisonment for a term not exceeding twelve months or to a fine not exceeding five thousand ringgit or to both such fine and imprisonment.
Application For Licence:
The application for a sales tax licence must be made in the prescribed Form JKED No.1. The duly completed Form JKED No.1 together with other relevant document must be submitted to the sales tax office where the applicant’s principal place of business is located. The locations of the sales tax offices as well as the districts served are specified in the Second Schedule of the Sales Tax Regulations 1972.
The documents required to be submitted include the following:
- 2 copies of form JKED 1
- 2 copies of administrative form
- 2 copies of Memorandum & Articles of Association, Form 24,
Form 44 and Form 49 (for companies incorporated under the Companies Act 1965) or 2 copies of Business Registration
Form A or Form B, and Form D
- 2 copies of identity card (Director/sole proprietor/all partners)
- 2 copies of photograph (Director/sole proprietor/all partners)
- 2 copies of location map
- 2 copies of manufacturing flowchart
- 2 copies of the list of raw materials
On being satisfied that a licence is required, the Director General of Customs shall issue the licence. There is no fee prescribed for the issuance of a sales tax licence.
The sales tax licence is in the prescribed Form CJ No.2 and must be displayed conspicuously at the manufacturer’s principal place of business. If the manufacturer carries on business in several places, such places of business must be included in the sales tax licence and a copy of the licence is to be similarly displayed at each place of business.
Generally, the licensed manufacturer will continue to be licensed until the licence is revoked. The sales tax licence may be revoked for the following reasons:
when the manufacturer ceases to carry on the business of manufacturing taxable goods;
when the manufacturer (company) is dissolved;
when the manufacturer (sole proprietor) dies;
when there are changes in the partnership.
The power of the Director General of Customs to revoke sales tax licence is provided under section 13A of the Sales Tax Act 1972. Sales tax licence may be revoked under the following circumstances:
when the taxable person ceases to carry on business of manufacturing taxable goods, or dies, or being a company is dissolved. In this case, a notice of revocation of the licence specifying the date of revocation shall be served on the taxable person.
When the taxable person contravenes the provisions of sections 17, 17A, 18, 19, subsections (1) and (2) of section 22. Before the said sales tax licence is revoked, a notice shall be served on the taxable person informing him of the proposed revocation and requiring him to make representation on the matter. If the Director General of Customs is satisfied that the sales tax licence should be revoked, a notice of revocation of the licence shall be served on the taxable person.
In other cases, the sales tax licence may need to be amended to accommodate changes that occur in the course of business. It is therefore the duty of the licensed manufacturer to forward the sales tax licence to the Sales Tax authorities for amendment in the following cases:
- When there is an alteration to the name of a company or business;
- When there is a change of address in respect of the place of business;
- When there is opening of new place of business or closing of any place of business;
- When there is a change or an addition to the commodities manufactured.
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