SST Audits and Bills of Demand in Malaysia: Sales Tax and Service Tax Disputes
Sales tax and service tax (SST) are administered by the Royal Malaysian Customs Department under the Sales Tax Act 2018 and the Service Tax Act 2018. Customs audits registered businesses and, where it finds tax short paid, issues a bill of demand with penalties. A decision can be reviewed by the Director General or appealed to the Customs Appeal Tribunal, each within 30 days of notification (section 96, Sales Tax Act 2018; section 81, Service Tax Act 2018).
NZSK acts for manufacturers, service providers, landlords, contractors and other SST-registered businesses in audits, voluntary disclosures, bills of demand, reviews and Tribunal appeals. Your tax agent or accountant keeps responsibility for the SST returns and computations, and we handle the legal dispute alongside them. We advise after reviewing your documents at a consultation.
Key Deadlines
30 Days
To appeal an LHDN assessment on Form Q
30 Days
For a Customs review or Tribunal appeal
1 Month
To claim goods seized by Customs
5 Years
Usual LHDN look-back for additional assessments
What changed when SST was expanded in 2025 and 2026?
From 1 July 2025, sales tax was extended to more goods and service tax to more services, including rental and leasing, construction and financial services. Changes followed in January 2026: service tax on rental and leasing is 6% from 1 January 2026, and the exemption for certain construction contracts signed before the expansion was extended to 30 June 2027.
Businesses brought into scope for the first time now face their first audits, and questions such as whether a service is taxable, when registration became compulsory, which rate applies and whether an exemption covers a contract. The answers often turn on the wording of contracts and invoices, so they are legal questions as much as accounting ones.
What happens in an SST audit?
Customs can audit a registered person at its office or at the business premises, examine accounts, invoices, contracts and import and export documents, and call for information. Audits usually test whether goods or services were taxable, whether the right value and rate were used, whether exemptions were properly claimed, and whether tax was accounted for in the right taxable period.
The audit ends with findings and, where tax is found short paid, a bill of demand for tax and penalties. Explanations given during the audit become the record for any review or appeal, so they should be accurate, consistent with your accounts and, where the point is legal, properly reasoned.
How do you challenge an SST bill of demand?
There are two routes, each with a 30-day deadline from the date you are notified of the decision:
- apply to the Director General of Customs for a review, which should be decided within 60 days where practicable; or
- appeal directly to the Customs Appeal Tribunal on Form A.
A review decision can itself be appealed to the Tribunal within 30 days. Compound matters cannot be reviewed or appealed. The tax remains payable while a review or appeal is pending, and the Tribunal will not hear an appeal until the tax and penalties are paid. See our Customs Appeal Tribunal page for the appeal process.
Can SST penalties be reduced, and when should you make a voluntary disclosure?
Late payment of SST attracts penalties that rise with the length of the delay, and an incorrect return can lead to further penalties and, in serious cases, prosecution. Customs may remit penalties in suitable cases, on an application with supporting documents.
If you find an error yourself, correcting it before Customs raises it usually leads to a better outcome than waiting for an audit. Whether to disclose, how far back to go and how to present it are legal decisions as well as accounting ones, particularly where the error points to a wider problem.
When is judicial review used in an SST dispute?
Judicial review in the High Court is used where the challenge is to the legality of the decision itself: for example, where Customs treated a guide or policy as if it were law, acted outside its powers, or decided without giving the business a fair chance to respond. In Lam Ah Company Sdn Bhd, a GST case, the High Court held that Customs’ guides have no force of law and did not bind the taxpayer. Judicial review needs leave and must be filed promptly and within three months of the decision. Because the same dispute cannot run in the Tribunal and in court at once, choose the forum before filing.
How NZSK handles SST audits and disputes
Bring the audit letters and findings, the bill of demand with the date you received it, your SST registration details and returns, the contracts and invoices behind the disputed items, and any Customs ruling, guide or exemption you relied on. We confirm the deadline, decide with you whether to seek a review or go to the Tribunal, prepare the grounds, represent you at the hearing, and tell you plainly when settlement or voluntary disclosure is the better course. Your tax agent or accountant handles the computations. Fees depend on the amount and periods in dispute, the records involved and whether a hearing is needed; we give a fee quotation after the consultation.
Frequently Asked Questions
Speak to a Tax & Customs Lawyer Now!
- (+60)12-401 4799 | (+60)3-8060 0267
- [email protected]
Consultation by appointment — Mont Kiara, Kuala Lumpur & Puchong, Selangor
