This guideline, published by the Royal Malaysian Customs Department on 5 February 2024, provides guidance on exemptions from registration under the Sales Tax Act 2018.
It aims to assist industries in identifying manufacturing operations that are exempt from registration as provided under subsection 20(1) of the Sales Tax Act 2018.
Most important content:
1. Subsection 20(1) of the Sales Tax Act 2018 empowers the Minister to exempt any manufacturer from registration through the Sales Tax (Exemption from Registration) Order 2018.
2. Schedule A of the Sales Tax (Exemption from Registration) Order 2018 lists 16 manufacturing operations that are given exemption from registration. Each of these manufacturing operations involves several activities to produce finished goods.
3. Any person carrying out only one manufacturing operation under Schedule A in a single manufacturing chain to produce goods is eligible for exemption from registration.
However, those carrying out more than one manufacturing operation under Schedule A in a single manufacturing chain to produce goods are not eligible for exemption.
4. The guideline provides detailed explanations and examples for each of the 16 exempt manufacturing operations listed in Schedule A.
5. The Sales Tax (Exemption from Registration) Order 2023 exempts any person manufacturing finished products based on Royal Pahang Weaving from registration, regardless of the sales value of taxable goods, for a period of two years effective from 3 May 2023 to 2 May 2025. Sure, here are a few examples extracted from the guideline for illustration purposes:
Example 1 (Operation 1 - Washing, printing, producing film slides or any format or combination of these activities):
Sally Sdn. Bhd. operates a photo shop business.
The company's business activities include services of washing and printing pictures on photo paper.
The processed pictures will be stored on compact discs. Sally Sdn. Bhd. is eligible for exemption from registration because it carries out only one manufacturing operation under Schedule A in a single manufacturing chain.
Example 2 (Operation 3 - Manufacturing of ready-mixed concrete):
Mr. Ah Lim is a manufacturer of ready-mixed concrete.
He receives orders for ready-mixed concrete from Syarikat Kamal Sdn Bhd.
Mr. Ah Lim delivers the ready-mixed concrete using a concrete mixer truck to the construction site.
Mr. Ah Lim is eligible for exemption from registration because he carries out only one manufacturing operation under Schedule A in a single manufacturing chain.
Example 3 (Operation 12 - Provision of personal tailoring services but excluding tailoring services provided by companies involved in the business of manufacturing clothing and other textile goods):
Sasha Tailoring provides personal tailoring services according to the desires and specifications of customers.
Therefore, Sasha Tailoring is eligible for exemption from registration because the company only provides personal tailoring services.
Example 4 (Operation 15 - Manufacturing of batik fabric using traditional techniques of manual block printing, manual screen printing and/or hand painting or drawing and goods thereof):
Impian Batik Enterprise produces batik fabric using the technique of manual block stamping. In this process, white fabric is colored using dyes and dried.
Next, blocks with batik patterns are stamped on the colored fabric using a liquid containing resin and wax.
Therefore, the company is eligible for exemption from registration because it carries out only one manufacturing operation under Schedule A in a single manufacturing chain, which is manufacturing batik fabric using the traditional technique of manual block printing.
Conclusion:
This guideline serves as a comprehensive reference for industries to understand the manufacturing operations that are exempt from registration under the Sales Tax Act 2018.
By providing detailed explanations and examples for each exempt operation, it assists businesses in determining their eligibility for exemption from registration.
The additional exemption for manufacturers of finished products based on Royal Pahang Weaving further supports specific local industries.
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