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GOODS AND SERVICES TAX (GST) - FAQs

Output
Q: Are all companies liable to be registered as GST
registered person?
A: Yes, if you make taxable supplies and have annual turnover
exceeding RM500,000. However, if your annual turnover is
below this threshold, you can still apply for voluntary
registration.
Q: What is a taxable supply?
A: A taxable supply may not be restricted to your sale of goods.
It includes : Disposal of business assets
Business gifts exceeding RM500 given to same customer in
the same year
Fringe benefits given to employees
Application of business assets for non-business purposes
Goods which are business assets on hand at deregistration
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Output (contd)
Q: If I am registered in Malaysia and provide services
outside Malaysia, is the supply subject to GST?
A: Yes, this is taxable supply but it is zero rated. You are
eligible to claim input tax for all supplies related to such
services.
Q: If I have a business registered outside Malaysia, do I
account for GST ?
A: No, the business is considered out of scope.

Output (contd)
Q: If I give discount to my customers, can I charge GST
on the discounted price?
A: Yes, GST should be computed on the discounted price
Q: When a certain quantity of goods are given free as
incentive for bulk purchases, for example for every 20
units of a product purchased at a price of RM5,000, I
offered my customer 2 units free, must I also account
GST on the 2 units given free?
A: GST will be based on RM5,000. The 2 units given free will be
considered as discount

Output (contd)
Q: If I give business gifts to my customers, do I have to
account for GST?
A: In principle, gifts to customers are deemed taxable supply
because it is made in the course of furtherance of your business.
However, under GST law, a gift is not a supply and no GST is due if
the cost of the gift is worth less than RM500 and given to the same
customer in the same year. Any input tax incurred is claimable.

Inputs
Q: Can a registered company treat all the GST paid for
the business acquisitions or purchases as his input tax?
A: Generally, all GST incurred can be treated as his input tax, if
he incurs the GST for his business purpose.
Inputs normally acquired can be categorised as follows :Capital assets goods that can be capitalised for accounting
purposes e.g. land and building, plant & machineries & office
equipment
Raw materials and components
Services, utilities and other charges
Services supplies other than goods such as maintenance of
plant and machineries, professional fees
Other charges telephone, rental, transportation
Utilities water, electricity
Administrative expenses
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Inputs (contd)
Q: If have to return some goods to my supplier due to
defect, can I claim GST paid on returned goods?
A: When you returned the goods, your supplier should refund
you the GST paid by way of a credit note. If you have already
claimed the input tax, then you have to reduce the said input
tax in the taxable period in which the credit note is issued
Q: If I acquire certain services from overseas, what is my
GST liability?
A: When you acquire services from overseas, you are treated as
making the supply. Therefore, you need to account for tax on
such services.
However, if you are making wholly taxable supplies, you can
claim the entire GST accounted, and hence no net GST
implication.
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Inputs (contd)
Q: Can I claim input tax on the whole value (purchase
price) of a machinery acquired under hire purchase?
A: Yes, you can claim on the whole purchase price based on the
instalments paid. In a situation where interest charged is
separately identified, the interest is not subject to GST (exempt
supply).
Q: What is the GST implication on machinery that I
acquire under lease?
A: If it is a finance lease, the treatment is similar to hire
purchase (as above).

If it is an operating lease, GST will be imposed on the value of


each lease payment. If interest is disclosed separately under
the leasing agreement, the interest is not subject to GST
(exempt supply)
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Inputs (contd)
Q: How do I claim input tax when I paid advance
payment for a machinery until it is ready for collection?
A: Your supplier would charge you GST on the value of each
payment received. You can claim input tax based on the tax
invoice that you receive.
Q: If I am given credit term by my supplier, can I claim
input tax before I make the payment to supplier?

A: Yes, provided you hold a valid tax invoice from your supplier

Other related matters


Q: If I loan some raw materials to another person for his
urgent use, do I have to account for GST output tax even
if the other person replaces the raw materials I loaned to
him?
A: Yes, it is a supply because the business asset is transferred
and consumed by another person.
Q: If I loan a machine (my business asset) to another
person for his use, do I have to account for GST output
tax?
A: Any usage of business asset by another person, whether or
not for a consideration, is regarded as supply of services.
Therefore, you have to account for GST output tax on the usage
of the asset based on open market value.
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Other related matters (contd)


Q: What if the machinery is leased out to a company
located overseas?
A: When you send the machinery to your lessee abroad, the
good should be treated as export and hence subject to GST at
0%.
When the good is subsequently brought back to Malaysia, GST
is payable on the machinery at the time of importation. You can
claim the GST paid on the machinery as input tax credit.

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Other related matters (contd)


Q: What happen if my customers fail to make payment on
goods previously supplied where output tax has been
accounted?
A: You can claim bad debt relief (or doubtful debt relief) on the
whole or any part of the GST output tax paid in respect of
taxable supplies, subject to the following conditions : You have already accounted for and paid the tax on the
supply
You have not received any payment or part payment six
months from the time of supply or the debtor has become
insolvent before the period of six months has lapsed,
You have taken sufficient efforts to recover the debt

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Employee benefits

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Output tax
Q: Under what instances do I have to account for output
tax on employee benefits?
A: Basically, any goods given free to employees are subject to
GST.

However, under the gift rule, if the cost of goods does not
exceed RM500 and given free to the same employee in the
same year, you do not need to account for GST.
If the cost exceeds RM500, you have to account for GST except
for those goods come under blocked input tax recovery or if it
is stated in the employment contract or company policy.

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Output tax (contd)


Q: Is the same applicable for services?

A: No, for services, you do not have to acount for GST if the
services for your employees are provided free.
Q: Should I acount for GST when
accommodation to my employees?

provide

free

A: No, since this is not a supply.


Q: If I provide free meal to my employees in the companys
canteen, do I have to acount for GST?

A: No, since this is not a supply.

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Output tax (contd)


Q: Is monetary rewards given to employees subject to
GST?
A: No, since money is neither goods nor services.
Q: If I provide car or housing loan to my employees as
employee benefits, do I have to acount for GST?
A: No, since this is an exempt supply.

Q: Are shares given free to employees are subject to GST


?
A: No, since this is an exempt supply.

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Recovery of input tax


Q: A manufacturing company provides transportation
(worker bus) for free to his workers. If the company
rents buses for the transportation, can the company
claim input tax incurred on the rental?
A: Yes, since the rental of buses is incurred for business.
Q: A company gives free trip to staff for excellent
performance. Can input tax be claimed on purchase of
the package?
A: Yes, since it is incurred for business.

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Recovery of input tax (contd)


Q: A company purchased 10 hampers worth RM2,000 to
be given to the employees. Can input tax be claimed on
the purchase?
A: Yes, since it is incurred for business.

Q: Can a company claim input tax on GST incurred on


training of staff?
A: Yes, since it is directly attributable to the business.

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Recovery of input tax (contd)


Q: Can a company claim input tax if tax invoice is
addressed to the employee?
A: No, unless the supply of goods or services is acquired in the
course of his official duty or acting on behalf of the taxable
person.
Q: Can a company claim input tax on handphone usage
which is in the employees name?
A: Yes, provided the company can prove that the expense is for
business purpose borne by the company i.e. appear in the
companys account and/or stated in the company policy.

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Disallowance of input tax


Q: Is GST incurred on purchase of corporate membership
in recreational club claimable?
A: No, because it is a blocked input tax.

Q: Can a company claim GST incurred on F&B for annual


dinner?
A: Yes, provided the function is attended by the employees of
the company only. If spouses/ family members of the
employees attend the function as well, apportionment has to be
made as GST incurred can only be claimed on amount
attributable to employees.

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Disallowance of input tax (contd)


Q: My company purchased and registered a car under the
companys name. The car is for business use including for
employees official use. Can the company claim input tax on
GST incurred on the car?
A: Generally, input tax incurred on any acquisition of passenger
car for company use is not allowed to be claimed.
However, if the car is exclusively used for business purpose, input
tax can be claimed subject to the approval and conditions imposed
by the Director-General. In such as case, the car can be identified,
for example, there is a company logo/ name on the car.

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Property developers

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Supply
Q: In the course of undertaking property development
project, I have to surrender part of my land to the State
Authority without money consideration to be used for
educational, religious, charitable or public use. These
supplies include roads, police stations, schools, recreational
areas and other public amenities. Are these supplies
subject to GST?
A: No, these are non-supplies and hence not subject to GST.

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Supply (contd)
Q: I have to transfer the infrastructure of utility services
such as sub-stations, sewerage treatment plant and
water tank to the respective utilities provider for a
nominal charge. Are these transfers/ supplies subject to
GST?

A: No, these are non-supplies and hence not subject to GST.

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Supply (contd)
Q: I charge administrative fees for services such as
endorsement of deed of assignment. Is the supply
subject to GST?
A: Yes, administrative services are subject to GST at standard
rate.
Q: I charge interest for late payment? Is the interest
subject to GST?
A: No, interest related to late payment is regarded as penalty
and is considered out of scope.

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Supply (contd)
Q: Is the conversion premium imposed by Federal/ State
Authority subject to GST?
A: No, the conversion premium and all other premium and fees
imposed by Federal/ State Authority related to real estate is
regarded as out of scope. Hence, is not subject to GST.

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Time of supply
Q: When do I account for GST for supply of uncompleted
property under progressive payment contract?
A: You have to account for GST at various stages of progressive
payment based on the earlier of :

a) When tax invoice is issued; or


b) When payment is received.
Q: Do I have to account for GST on booking fee?
A: No since it is not part of the consideration. However, if you
receive payment upon signing of Sale and Purchase Agreement,
that payment will form part payment for the sale of real
property and will be subject to GST.

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Input tax credit


Q: Is the input tax incurred for the entire property
development comprises of residential, commercial and
industrial units recoverable?
A: No, only input tax on goods and services which will be used
wholly in making taxable supplies is recoverable. Hence, in this
case, only input tax for inputs used in making commercial and
industrial units is recoverable. Other residual input tax is
apportioned between taxable and exempt supplies.

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Input tax credit (contd)


Q: Can I claim input tax for the supplies incidental to the
supply of the main development project e.g. landscaping,
roads, school, police station & other public amenities?
A: Yes, if they are directly attributable to taxable supplies such
as development of commercial or industrial properties.
For input tax attributable to development of residential houses,
input tax is not recoverable.
Where the inputs are used for both taxable and exempt
supplies, they are regarded as residual input and should be
apportioned to determine the input tax claim.

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Input tax credit (contd)


Q: How do I claim my residual input tax?

A: The proposed fomula is as follows :Input tax

Total value of Taxable supplies


Total value of Taxable + Exempt supplies

Q: Instead of using turnover method, can use other


method such as floor space?
A: Possible, but you need to apply to the Director-General of
Customs Department

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Input tax credit (contd)


Q: Can I claim input tax on speculative supplies which
are incurred in the course of investigating potential
projects?
A: Where the land has not been acquired, the input tax incurred
on speculative supplies such as consultant fees, feasibility study
fees should be regarded as residual input tax.
At the later stage when the land is acquired, input tax can be
claimed if it is directly attributable to taxable supply.
If it relates to mixed supply, the apportionment is required.

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Retention sum
Q: When customer pays deposit to a lawyer who acts as
the developer agent, does the deposit triggers a tax
point?
A: Yes, hence GST is chargeable on deposit received.

Q: When customer pays deposit to a lawyer who acts in


the capacity of stakeholder, does the deposit triggers a
tax point?
A: No, the tax point is not trigger until the retention sum is
released.

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Liquidated damages
Q: Is there any GST implication on liquidated damages
imposed for late delivery?
A: No, since it does not form part of supply.
Q: If I have to pay liquidated damages & at the same
time charge the client for another supply, can I set-off
each other?
A: No, you cannot reduce the value of taxable supply by setting
off each other as they relate to different supplies. GST has to
be accounted separately.

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Others
Q: If I supply materials and utilities and loan workers to
contractors for use in my project, can I contra the value
of the materials, utilities and workers from the value of
construction services supplied to me?

A: No, these are regarded as two different supplies.

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Thank you

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