GOODS AND SERVICES

TAX
(GST)

Agenda
1 SALIENT FEATURES OF GST
1.1

Why GST?

1.2

What Is GST?

1.3

Malaysias GST Model

1.4

Basic Elements Of GST

Agenda
2 INPUT TAX
2.1

What Is Input Tax

2.2

Allowable Input Tax

2.3

Criteria To Claim Input Tax

2.4

Non Allowable Input Tax (Blocked Input Tax)

2.5
2.6

Apportionment Rules
De Minimis Limit

Agenda
3 ACCOUNTING FOR TAX
3.1

Charging Output Tax

3.2

Tax Invoice, Credit Note & Debit Note

3.3

GST Adjustments

3.4

Taxable Period

3.5
3.6

Submission Of GST Returns

Record Keeping

Agenda
4 MANUFACTURING
4.1

GST treatment on Manufacturing

4.2

Matters related to Manufacturing

Agenda
5 TRANSITIONAL ISSUES
5.1

Acts Repealed

5.2

Supplies Spanning GST

5.3

Non Reviewable Contract

5.4

Registration

5.5
5.6

Special Refund
Business Preparation

1. SALIENT FEATURES
OF GST

1.1
8

Why GST Current consumption taxes

Sales
Tax

Manufacturer

Wholesaler

Sales Tax is
collected at the
manufacturer
level

1972

Year of
implementation

Selected goods
imported or
manufactured locally

Scope of tax

Prescribed
services

RM100,000

Threshold

0 RM3 million

5%, 10% &

specific

Rates

6% & specific

Retailer

Consumer

Element of sales
tax embedded in
the price paid
by consumer

1975

Services
provider

Service
Tax

Consumer

Service Tax is
collected by the
service provider
9

Examples Goods subject to 5% Sales Tax

5%

10

Examples Goods subject to 10%

Sales Tax

11

Current Consumption Tax - Service Tax

Restaurant
Hotel

6%

Security Services

Insurance

Lawyer

Parking Lots

Car Service Centres

Professional Services
12

GST - More Efficiency &

Effectiveness

Weaknesses SST
Tax on Tax (cascading, double taxation,
compounding effect)

Self Policing

Transfer Pricing

Less Bureaucracy

Tax Embedded In Goods Exported

Enhance Tax Compliance

WHY GST?
Government
Revenue

Underground economy
Hidden/shadow sectors/industries
may be encouraged to be in the GST
system

Government is too dependent on

income tax
56.4%(2012)

Government is too dependent on

petroleum revenue
32.6%(2012)

13

13

13

SST is ineffective Compounding effect

Assume SST at 10%

Manufacturer
Cost RM 100
+ 10% tax
(RM10)

RM10.00

Govt
collects:

Wholesaler

RM110

+ 20% Margin
(RM 22)

Consumer

+ 30% Margin
(RM 39.60)

RM171.60
Final price paid
by Consumer

RM10 x 20%
= RM2.00

Tax
RM10

RM132

Retailer

Tax
Nil

(10 + 2) x 30%
= RM3.60

Tax
Nil

*Tax ballooned to
RM15.60 (10 + 2 + 3.60)

RM10.00
Total tax
collected by
Govt

RM
5.60
Total tax loss/
uncollected

14

GST is an effective tax because it is captured at

every stage (GST at 6%)

Manufacturer

Wholesaler

Retailer

Consumer

Cost RM 100

RM100

+ 20% Margin
on RM100 w/oTax
(RM 20)

RM120

+ 30% Margin
on RM120 w/o Tax
(RM 36)

+ 6% tax
(RM6)

RM6

+ 6% tax
on RM20
(RM 1.20)

RM7.20

+ 6% tax
on RM36
(RM 2.16)

Govt
collects:

Tax
RM 6

Tax
RM 1.20

Tax
RM2.16

RM156

RM9.36

RM165.36
Final price
paid by
Consumer

RM9.36
Total GST
collected

RM 0 (Zero)
Total tax loss/
uncollected

15

1.2
16

What is GST?
Basic principles of GST
A consumption tax in the form of value added tax
each stage of business transaction up to the retail stage of distribution

Also known as Value Added Tax (VAT)

GST incurred on inputs is allowed as a credit to the registrant
offset against output tax

INPUT
Raw materials, rents,
electricity, furniture,
professional services
etc.

GST on inputs

= Input tax

OUTPUT

Business
Claimed
input tax

Goods
Services
GST on output

= Output tax

What is GST?
TYPES OF
SUPPLY

OUTPUT TAX

INPUT TAX

Standard rated

6%

Claimable

Zero rated

0%

Claimable

Exempt

No GST charged

Non claimable

18

What is GST?
Expenses/purchases

Sales

RM5000.00

(RM8,000)

GST 6%=RM300
incurred

GST payable
(net GST)

Garment
Manufacturer

GST 6%=RM480
charged

= RM480-RM300
= RM180

GST at 6%

19

What is GST?
Services
performed

Expenses/purchases
RM2000.00
GST 6%=RM120

Service Provider
(RM4,000)

incurred

GST 6%=RM240
charged

GST payable
(net GST)

= RM240-RM120
= RM120

*GST at 6%
20

How GST Works? Standard - rated

GST AT 6%

Manufacturer

Wholesaler

Manufacturer Wholesaler
claims back claims back
GST
GST

Retailer

Retailer
claims back
GST

Consumer
Consumer
pays 6%
GST only
21

How GST Works? Standard - rated

Delivery or
Supply Chain

Manufacturer

Wholesaler

VALUE
ADDED
ACTIVITY
Purchase cost : RM100
GST* 6% : RM6
Purchase Price : RM106
*Note : claim input tax

Added value : RM25

(Add GST : RM1.50)

Retailer

Consumer

Selling price : RM125

GST* 6% : RM7.50
Total selling price:
RM132.50
22

How GST Works? Standard Rated

GST @ 6%

Tax remitted to Government

Manufacturer

Price: RM10
GST: RM 0.60

Output tax =

Wholesaler
Price: RM50
GST: RM 3.00

RM 0.60

Output tax = RM 3.00

Input tax = RM 0.60
RM 2.40

Retailer
Output tax =RM 3.60
Input tax =RM 3.00

Price: RM60
GST: RM 3.60

Consumer
pays

6%
GST only

RM 0.60
RM 3.60

Consumer

Total amount remitted to

Customs = RM 3.60
GST 6%

How GST Works? Zero - rated

GST AT 0%

Manufacturer

Wholesaler

Manufacturer Wholesaler
claims back claims back
GST
GST

Retailer

Retailer
claims back
GST

Consumer
Consumer
does not pay
any GST
24

How GST Works? Zero - rated

Delivery or
Supply Chain

Manufacturer

Wholesaler

VALUE
ADDED
ACTIVITY
Purchase cost : RM100
GST* 0%
Purchase Price : RM100
*Note : claim input tax

Added value : RM25

Retailer

Consumer

Selling price : RM125

GST* 0% : RM0
Total selling price: RM125

25

How GST works? Exempt

GST 6%

Medical supplier

Supplier claims tax

paid on inputs

NO GST

Private hospital

Private hospital
cannot claim GST on
inputs

Consumer

Private Hospital
does not charge
GST consumer does
not pay any GST

26

How GST Works?

Standard rated supply
Manufacturer
Claim back GST

6%

Wholesaler Claim back GST

Retailer Claim back GST

Consumer pays 6% GST

only

Retailer Claim back GST

Consumer pays 0% GST

Zero-rated supply

0%
Manufacturer
Claim back GST

Wholesaler Claim back GST

Exempt supply

6%
Manufacturer
Claim back GST

GST

Private Hospital
Cannot claim back GST

No GST imposed on the

Supply to consumer

27

1.3
28

GST model

To replace current tax system

Sales Tax &
Service Tax (SST)
5%, 6%, 10% & specific rate
Various threshold

Goods and Services

Tax (GST)
Rate = 6 %
Threshold = RM500,000

GST is charged on goods and services that

are
supplied in Malaysia
imported into Malaysia
29

GST model Standard rated supply

Standard Rate
30

GST model Zero rated supply

EXPORTED GOODS AND

SERVICES

300 UNITS A MONTH

Infant Milk

Water for Domestic Users

31

GST Model Exempt

Supply

GST

Rail Transporation

Bus/Taxi/Hire Car

Water Transportation

Toll Highway

Residential Property

Land for Agriculture

& General Use

Education

Health

Financial Services
32

GST model Supply by Government

Federal &
State Government
All supplies by Federal &
State government
Out of Scope

Subject to GST

Local Authority &

Statutory Body
Supplies made in the regulatory
and enforcement (R&E) functions
eg. Assessment rate collection, issuance of
licenses, penalty

Supplies that have been

directed by Minister in the GST
(Government Taxable Supply)
Order

Non R&E functions

ie. Business activities such as rental
facilities

eg. Supply made by RTM, Prison

Department

Acquisitions

Need to pay GST on their Need to pay GST on their

acquisitions
acquisitions
Relief on all goods excluding Need to register for GST and input
petroleum & imported
motor tax claimable
cars

33

Special Schemes
To provide cash flow relief to businesses
Approved Trader Scheme (ATS)
facility given to major exporters where GST on
imports is suspended

Approved Toll Manufacturer Scheme (ATMS)

facility given to local toll manufacturer to disregard
tax on value added charges to overseas client

Approved Jewellers Scheme (AJS)

GST suspended on gold and precious metal acquired
by jewellery manufacturers

Flat Rate Scheme

to allow farmers to collect additional charges at
specific rate from the buyers

34

Special Schemes
To provide cash flow relief
Margin Scheme
second hand car dealers to account GST on the
margin
Warehousing Scheme
GST suspended in public and private warehouse

To promote tourism
Tourist Refund Scheme
tourists allowed to claim GST paid on purchases
Designated Area
no GST in Labuan, Langkawi & Tioman
35

1.4
36

BASIC ELEMENTS OF GST

GST is charged on
the taxable supply of goods and
services
made by a taxable person
in the course or furtherance of
business
in Malaysia
GST is charged on the imported

37

Basic Elements of GST

Scope of tax
Supply

Importation

Taxable supply

Not
Subject to
GST

Taxable person
For the purpose of
business

Subject to
GST

Made in Malaysia
38

Basic Elements of GST

Supplies not subject to GST
cash donation or grants where a
person does not get benefits
compensation
damages

or

liquidated

disbursements,
dividends,
loan
repayments or capital injection
transfer of business as a going
concern
39

Basic Elements of GST

Importation
imported goods (supply outside Malaysia) GST is charged
at point of import (entry point)
imported services for business purpose GST is charged by
reverse charge mechanism (deemed as self supply)
Recipient of services is treated to
have made the supply to himself
and accounts for the output tax

40

Supply
General meaning

to furnish, serve or provide something

in the case of goods the transfer of title or
ownership, outright cash or credit sale, hire
purchase etc
in the case of services the provision of services

Generally, a transaction is a supply if :

someone does something or agrees to do something in

return for a consideration and

involves a supplier and a receiver

anything done for consideration

sale, barter, exchange, license, rental, lease, right to use, gifts or

disposition
linked to the supply
42

Supply
GST charged on
taxable supplies (sales of goods /
services)
deemed supplies for examples:
disposal of business assets
private use of business asset
Payment not paid to taxable person for the
purchase made after 6 months
gifts costing more than RM 500
goods sold in satisfaction of a debt
imported services
supply of service with no consideration
to connected person

43

CONSIDERATION
Consideration = any payment made or to be made in
money or otherwise
= act of forbearance, whether or not
voluntary
In respect of the supply of goods or services
Consideration (Section 2 GST Act 2014)
any payment made or to be made, whether in money or otherwise, or any act or
forbearance, whether or not voluntary, in respect of, in response to, or for the inducement
of, the supply of goods or services, whether by the person or by any other person:
Provided that a deposit, whether refundable or not, given in respect of the supply of
goods or services shall not be considered as payment made for the supply unless the
supplier applies the deposit as consideration for the supply
45

TYPES OF SUPPLY
Taxable Supply
STANDARD RATE

Tax rate 6%
e.g: commercial
properties,
medical
equipments,
furnitures, etc.
Supplier need to
charge GST on the
supply made

ZERO RATE

Tax rate 0%
e.g: paddy, fresh
vegetable,
poultry
(GST Zero Rate
Supply Order 2014
- for detailed list)
47

Types of Supply
Non-Taxable Supply
EXEMPT

No GST
supply of services
e.g: public
transportation, toll
highway, etc.
(GST Exempt Supply
Order 2014- for
detailed list)

OUT OF SCOPE

Non-business
supply
Government supplies
(except selected
services), supplies by
Local authorities and
Statutory bodies R&E
functions
48

PLACE OF SUPPLY
Place of supply
To determine whether a supply is made in
Malaysia or not

different
rules
for supply of goods and
Rules for
supply
of goods:
supply of services

Goods treated as supplied in Malaysia

removal from a place in Malaysia

another place in Malaysia (local supply)
removal from a place in Malaysia to a
place outside Malaysia (export)

to

50

Place of supply of goods

Goods treated as supplied outside
Malaysia

removal from a place outside

Malaysia to a
place inside
Malaysia (import)
removal from a place outside
Malaysia to another place outside
Malaysia (out of scope)

51

Place of supply of services

SUPPLIER OF SERVICES BELONGS ?
MALAYSIA

OTHER
COUNTRY

Business / Fixed
Establishment

YES

NO

Supplier belongs in
Malaysia

Usual place of
residence

YES

NO

Supplier belongs in
Malaysia

Business / Fixed
Establishment

YES

YES

Supplier belongs in
Malaysia if the supply
of the business is most
directly concerned with
Malaysia
52

Imported services

Company A
(Malaysia)
Value of
Service = RM10,000
Treat as normal practice
Value of
Service = RM10,000
6% GST = RM 600

Company B
(UK)

Reverse Charge Mechanism

GST-03
OUTPUT TAX
INPUT TAX

=
=

RM600
RM600
RM 0

53

TIME OF SUPPLY
To determine when tax is due and payable on a
supply
General time of supply rules

basic tax point for supply of goods

the time when goods are removed
the supplier sends the goods to the customer
the customer collects the goods from the supplier

the time when goods are made available

e.g. if the supplier is assembling something

on the

customer's premises

basic tax point for supply of services

the time when the services are performed

55

Time of Supply
Events before basic tax point
Time of Supply when the payment is received or
tax invoice is issued to the extent covered by the
invoice or payment, whichever is the earlier

21 days rule

if tax invoice

is issued within 21 days after the

basic tax point, then time of supply is the time
of the tax invoice

Power of the DG
may alter the time at which supplies are made
Notes: It is an offence under GST Act 2014 if tax

56

Time of Supply

Actual Time of
supply
24.7.14

Tax invoice issued within 21 days

1 July

4 July

24 July

Goods removed
or Services
performed

Tax invoice
issued

1 Aug

57

Time of Supply

Actual
Time of
supply

1 June

14
June
Tax invoice
issued

24
June
Time of
payment

1 July

10
July

1 Aug

Goods removed
or Services
performed
58

Time of Supply
Scenario 1

within

21 days

30 May

3 Jun

6 June

Goods removed
(basic tax point)

Payment received

Tax invoice issued

Time of supply is on 6 June even though payment

is received before the date of tax invoice

Time of
Supply
59

Time of Supply
Scenario 2
30 May

> 21 days

Goods removed
(basic tax point)

Time of
Supply

26 June

29 June

Tax invoice issued

Payment received

Time of supply is on 30 May

basic tax point
60

Time of Supply Specific Rules

CONSIGNMENT SALES

Concept

1
Consignee

Consignor
Not a supply

customer

12 months

Basic Time of supply?

=> When consignor received the statement of sale from consignee (date of
statement).
Actual Time of Supply?
=> Date of tax invoice issued by consignor to consignee

Time of supply Specific Rules

Consignor has to account for GST,
when it becomes certain that a supply has taken place, or
{the time when the consignor receives a statement of sales from the
consignee that the goods had been sold}

12 months after the removal of the goods,

whichever is the earlier
If a tax invoice was issued within 21 days of the date of the
consignor receives the statement of sales or after twelve
months the goods were sent, then the time of supply is the
date of the tax invoice.

62

VALUE OF SUPPLY
Value for GST :
Value of supply (consideration in money)
Value = consideration GST portion
Value of supply
money term)

(consideration

not

in

Value = open market value

Value of imported goods
Value = value for customs duty + amount
of
customs duty paid/to be paid +
amount of excise duty
paid/to
be paid ( if any )
Value of imported services

64

Cont

Value of Supply
Value of supply (consideration in money)
Value = consideration GST portion
Example: Company A receives payment for printer
from Company B = RM 2,600.
GST rate is 6%

GST = Consideration x Tax Fraction

GST

= RM 2600 X

= RM 147.17

106

Value of supply = Consideration GST = RM2600 - RM147.17

= RM2452.83
65

Value of Supply
Value of supply (consideration not in money
term)
Value = open market value (OMV) of the
consideration
OMV refer to theThird Schedule of GST Act 2014
Example 1
Ali who is a mechanic buys a second hand table from
Ahmad. Ali does not pay in money but agrees to repair
Ahmads car. If Ahmad is a registered person, he has to
account GST for the disposal of second hand table with the
value calculated using the open market value of Alis repair
service using.
66

Value of Supply
Value of supply (consideration not in money
term)
Example 2
Ali buys an old forklift from Ahmad. He pays
RM3000 in cash and agrees to repair Ahmads
car as full settlement. If Ahmad is a registered
person, he has to account for the disposal of the
forklift on the value of RM3000 cash and the
open market value of Alis repair service.
Value of imported services
Value = payment made
67

Value of Supply
Value of imported goods
Value = value for customs duty + any
customs duty paid + any excise duty paid
Example
Ahmad imported fabric from Japan for a customs value of
RM4000. The rate for import duty is 30%. The value on
which GST is chargeable is as follows:Value
= RM4000
Import duty 30% = (RM4000 x 30%)
= RM1200
Total value for GST
= (RM4000 + RM1200)
= RM5200
GST (6% X RM5200)
= RM312

68