3 Common Mistakes in SST Exemption Applications
Quick Take:
SST exemption can significantly reduce manufacturing costs, but many companies still pay unnecessary tax because of application errors. The three most frequent mistakes? Wrong HS classification, incomplete documentation, and ignoring C1 renewal obligations.
Why It Matters:
An incorrect application or invalid approval can result in backdated SST charges and penalties. This does not just increase costs—it can delay production, impact supply chain commitments, and weaken your pricing advantage in the market.
3 Mistakes You Must Avoid
A) Incorrect HS Code Selection
Misclassification is the number one reason exemptions fail. Always verify your HS code against the Customs Duties Order 2022 and ensure alignment with the approved product description.
B) Incomplete or Unsupported Documentation
Missing Bill of Materials (BOM), incomplete process flow diagrams, or absence of supporting purchase orders can trigger queries from Customs, thus becoming red flag during audit.
3) Failure to Track Validity
Many companies overlook the validity of their exemption certificate. This means they continue importing under invalid certificates, leading to significant backdated SST liabilities.
Case in Point
A precision tooling manufacturer recently avoided RM180,000 in unnecessary SST after we discovered their HS codes were incorrect and their exemption validity had been used with other importation documentation. With a structured review, they secured fresh approval within 24 hours.
Related Regulation
Sales Tax (Persons Exempted from Payment of Tax) Order 2018
Customs Duties Order 2022
RMCD Guide on Sales Tax Exemption under Schedule C
