Facilities under Sales Tax Act 2018 For Registered Manufacturers

Background

Registered Manufacturers are entitled to source for Raw materials, Components and Packaging materials that are used in the manufacturing and packing of goods manufactured free of Sales tax. This is consistent with the concept of Sales tax being a single stage tax imposed at manufacturing stage. This is to avoid the accretion of sales tax on the same product when raw materials,components and packaging materials are purchased from different manufacturers or imported.

Exemptions for Registered Manufacturers Sourced Directly or Indirectly

Customs Dept has published a Guide on this Facility under the General Guide on Sales Tax and the details are described at page 23, see General Guide - Sales Tax
The relevant provisions regarding such Facility is under Schedule C of the Sales Tax (Persons Exempted From Sales Tax) Order 2018 and is as follows :
Registered Manufacturers of normal products need to look at Item 1, item 3 or item 5 regarding type of sourcing, or nature of products sourced and the Conditions that need to be complied.

JADUAL C/SCHEDULE C

(1)

(2)

(3)

(4)

(5)

Item No.

Persons

Good Exempted

Conditions

Certificate to be signed by

1.

Any registered manufacturer

Raw materials, components and packaging materials excluding petroleum

(a) That the goods are approved by the Director General; (b) that the goods are imported or purchased from another registered manufacturer or a warehouse licensed under section 65 or licensed manufacturing warehouse under 65A of the Customs Act 1967; (c) that the goods shall be used solely in the manufacturing of finished goods of the person mentioned in column (2); (d) that the person mentioned in column (2) shall pay the sales tax on any goods that cannot be accounted for; (e) any other conditions the Director General deem fit to impose.

Registered Manufacturer

2.

Any registered manufacturer of petroleum product

Raw materials, components and packaging materials including petroleum to be used as raw material

(a) That the goods are approved by the Director General; (b) that the goods are imported or purchased from another registered manufacturer or a warehouse licensed under section 65 or licensed manufacturing warehouse under 65A of the Customs Act 1967; or (c) that the goods shall be used solely in the manufacturing of finished goods of the person mentioned in column (2); (d) that the person mentioned in column (2) shall pay the sales tax on any goods that cannot be accounted for; (e) any other conditions the Director General deem fit to impose.

Registered manufacturer of petroleum product

3.

Any person acting on behalf of registered manufacturer

Raw materials, components and packaging materials excluding petroleum

(a) That the person is approved by the Director General; (b) that the goods are approved by the Director General; (c) that the goods are imported or purchased from another registered manufacturer or a warehouse licensed under section 65 or licensed manufacturing warehouse under section 65A of the Customs Act 1967 by person acting on behalf of registered; (d) that the goods shall be delivered and used solely in the manufacturing of registered manufacturer; (e) that the person mentioned in column (2) shall pay the sales tax on any goods that cannot be accounted for; (f) any other conditions the Director General deem fit to impose.

Registered Manufacturer

4.

Any person acting on behalf of registered manufacturer petroleum product.

Raw materials, components and packaging materials including petroleum to be used as raw material

(a) That the person is approved by the Director General; (b) that the goods are approved by the Director General; (c) that the goods are imported or purchased from another registered manufacturer or a warehouse licensed under section 65 or licensed manufacturing warehouse under section 65A of the Customs Act 1967 by person acting on behalf of registered manufacturer of petroleum product; (d) that the goods shall be delivered and used solely in the manufacturing of registered petroleum manufacturer; (e) that the person mentioned in column (2) shall pay the sales tax on any goods that cannot be accounted for; (f) any other conditions the Director General deem fit to impose.

Registered manufacturer of petroleum product

5.

Any registered manufacturer

Semi-finished taxable goods or finished taxable goods subsequently returned after completion of subcontract work

(a) Registered manufacturer in column (2) sent unfinished goods to another registered manufacturer to complete and manufacture the goods mentioned in column (3); (b) that the goods mentioned in column (3) are subsequently acquired back by the registered manufacturer in column (2); (c) that the registered manufacturer in column (2) shall pay the sales tax on any goods that cannot be accounted for; (d) any other conditions the Director General deem fit to impose.

The person approved by the Director General

Sales Tax Deduction Facility with effect from 1 Jan 2019

With effect from Jan 2019 the Customs dept has also implemented Sales tax Deduction facility which is somewhat similar to the Credit system that existed under Sales Tax Act 1972 to address situations where Registered manufacturers have no choice but to purchase Raw materials, Components and packing materials from Marketing firms or Distributors that have been appointed as Agencies or because the quantity and value of such products makes it cumbersome for Manufacturers or Importing Firms to handle.

For details of Deduction Facility see this Guide Sales Tax Deduction Facility