SUPPLY. 1) Meaning of Supply. 11) Accounting entry for supply. 2) Supply of goods. 10) Value of. 3) Supply of services. supply. 9)Time of.

Transcription

1 SUPPLY 1

2 1) Meaning of Supply 11) Accounting entry for supply 2) Supply of goods 10) Value of supply 9)Time of supply SUPPLY 3) Supply of services 4)Gift rule 8) Place of supply 5) Not a supply 7) Type of supply 6) Consideration 2

3 1) MEANING OF SUPPLY 3

4 Meaning of supply Includes all forms of supply, including supply of imported services, done for a consideration and anything which is not a supply of goods but done for a consideration is a supply of services. Consideration : Any payment made or to be made whether in money or otherwise (barter) 4

5 2) SUPPLY OF GOODS 5

6 Supply of goods Meaning of goods Any kind of movable or immovable property except money in circulation as currency in Malaysia and others Supply of goods the transfer of the whole property in goods transfer of possession in goods with agreement to sell or to transfer the ownership of the goods in the future 6

7 Supply of goods Example 1: A Sdn Bhd sells a printing machine to ABC Sdn Bhd. By selling the printing machine, A Sdn Bhd is transferring its ownership of the printing machine to ABC Sdn Bhd. The sale of the printing machine is a supply of goods. Example 2: A Sdn Bhd buys a dump truck for RM125,000 under a hire purchase agreement with a bank. The ownership of the truck is caveat by the bank until the Company makes full payment of hire purchase loan amount. The hire purchase transaction is supply of goods. 7

8 3) SUPPLY OF SERVICES 8

9 Supply of services Meaning of services Anything which is not a supply of goods but is done for a consideration is a supply of services Supply of services Lend, rent or hire goods to another person Applies treatment or process on another person s goods Uses goods owned by the business (i) For private use (ii) Used for purposes other than business (iii) Made available for another persons use but not done in the course of furtherance of business of the owner of the goods Example Example 2 (page 11) Example 1 (page 11) Example 3 (page 12) Loan machine used for business to another related company 9

10 Supply of services Meaning of services Supply of services Grants, assigns or surrenders a right for a consideration Supply of services with no consideration to connected persons Assigns the right to use his patent or copyright to another person Example Free service to business partners, family members Royalty 10

11 Supply of services Example 1: XYZ Tools Sdn Bhd sent their tools to B Sdn Bhd for heat treatment to harden them. The heat treatment done by B Sdn Bhd is a supply of services. Example 2: A leasing company leases out an excavator to a customer for a period of two years. The Company still retains ownership of the excavator but the customer is in possession of the excavator during the rental period. Such transfer is a supply of services. 11

12 Supply of services Example 3: ABC Sdn Bhd, a manufacturing company, organised an international golf tournament and invited a few international players to join the event. The Company provides the secretariat the usage of its office equipment such as the scanner, computer and photocopier. The usage of the office equipment is not for the purposes of the Company s manufacturing business. The usage of ABC Sdn Bhd s office equipment for any purpose other than its own business purpose, whether or not for a consideration, is a supply of services by ABC Sdn Bhd to the players. 12

13 4) GIFT RULE 13

14 Gift rule Gift out of scope of GST 1) Gifts given in the course of business to the same person and total costs to the donor is less than RM500 Gift deemed supply 1) Gifts given in the course of business to the same person and the total costs to the donor is more than RM500 2) Gifts to an actual or potential customer of an industrial or commercial sample in a form not ordinarily available for sale to the public * must not be goods the business normally sells to the public Example : merchandise marked as sample and in the form of reduced size of actual merchandise available for sale 2) Gift to an actual or potential customer of an industrial or commercial sample in the form of goods the business normally sells to the public 14

15 5) NOT A SUPPLY 15

16 Not a supply Not a supply Transfer of business as a going concern Contribution by an employer and an employee (individual) to a pension fund, EPF and SOCSO Supply of goods excluded from input tax credit Insurance indemnity settlement Supply by a foreign diplomatic and consular mission 16

17 6) CONSIDERATION 17

18 Consideration Consideration Any payment made or to be made whether in money or otherwise. Monetary consideration - Cash, cheque or credit card, bank transfer and deduction from bank account Non monetary consideration - Goods or services provided as payment e.g.barter Not consideration No direct link between the payment and the supply; OR No supply of goods or services in return for the payment Examples : (i) Fines and penalty charged (ii) Grants (iii) Monetary donation (iv) Sponsorship payment (no benefits in return) * (v) Project funding * If the sponsor receives benefit in return from the sponsorship like advertising and publicity SUPPLY 18

19 Scope of supply Transaction Goods & Services? No Money as legal tender is not considered as goods Yes Out of scope Not a supply No Consideration? Yes Supply Deemed supply No Out of scope Yes Deemed not a supply Yes Within scope of GST No 19

20 7) TYPE OF SUPPLY 20

21 Types of supply Supply Taxable supply Exempt supply Standard rated Zero rate Deemed supply Disregarded supply 21

22 Types of supply Type of supply Output tax Input tax Standard rated 6% claimable Zero rated 0% claimable Exempt No GST charged Not claimable 22

23 Standard rated supply Standard rated supply = 6% All supply of goods or services not specifically designated as zero rated or exempt supply Examples: Sale of manufactured goods Disposal of business assets (with or without consideration) Business assets used for non business use Business gifts exceeding RM500 Employee benefits 23

24 Zero rated supply Zero rated supply = 0% Agriculture products paddy and fresh vegetables Livestock supplies meat, mutton, swine Fish, prawns, cuttlefish, crabs, cockles etc Foodstuff rice, sugar, table salt, plain flour, cooking oil Poultry and eggs Supply of first 300 units of electricity to domestic users Supply of treated water to domestic users Exported goods International services * * (i) services performed abroad (performed wholly outside Malaysia); and (ii) services which directly benefit a foreign person who is outside Malaysia when services are performed 24

25 Exempt supply Exempt supply = NO GST Public transportation Rail, bus, taxi and ferry Land for residential, agriculture and general use (burial ground, religious building or playground) Private health and education Financial services Accommodation at hotels, inns, boarding houses, services apartments, shop apartments for 28 days or more and used predominantly as place of residence or abode of any individual Highway toll Childcare services provided by childcare centers registered under the Child Care Centre Act

26 Supply by Government/Government Agencies Government refers to Federal Government and State Government Government Agencies Statutory Body and Local Authority Types of Government services Supplies by Federal and State Government Supplies by Local Authority and Statutory Body 1) Supplies made in the regulatory and enforcement (R&E) functions (assessment rate collection, issuance of license and penalties) 2) Non R&E (e.g. rental activities) GST impact Out of scope 1) Out of scope 2) 6% 26

27 Out of scope Out of scope supply Non business supply Supply of goods made outside Malaysia / 3 rd country transaction Supply of goods by a person who does not belong in Malaysia other than supply of imported services Business below threshold Government services Supply of goods or services made within or between designated areas i.e. Langkawi, Labuan and Tioman 27

28 Deemed supply Deemed supply of goods Transfer or disposal of business assets (with or without consideration) Change of use of asset Deemed supply of services Business assets *: (i) put to private use (ii) used for purposes other than for business (iii) made available for another person s use but not done in the course or furtherance of business of the owner of the goods Supply of services to a connected person e.g. A Sdn Bhd is a car trader and acquires a car on which it claims input tax credit. A Sdn Bhd subsequently transfers the car to its fixed assets for use of the Managing Director * except if no consideration received AND supplier is not entitled to input tax on the supply or importation of the goods 28

29 Mixed supply GST treatment Combination of taxable and exempt supplies need to identify incidence of input tax for taxable and exempt supply apportion the residual input tax 29

30 8) Place OF SUPPLY 30

31 Place of supply The place of supply is important because GST is charged if the supply of goods or services are made in Malaysia. Place of supply for goods: treated as made in Malaysia when goods removed from a place in Malaysia to a place in or outside Malaysia Place of supply of services: Treated as made in Malaysia if supplier belongs in Malaysia, i.e. the business or fixed establishment or the usual place of residence is in Malaysia 31

32 Place of Supply - Goods Removed from Received in Place of supply GST treatment Malaysia Malaysia In Malaysia Standard rated Malaysia Overseas In Malaysia Zero rated Overseas Overseas Outside Malaysia Out of scope Overseas LMW / FIZ Malaysia (importer) LMW / FIZ or non LMW or FIZ Outside Malaysia (treated as import of goods) In Malaysia Pay GST to Customs Standard rated 32

33 Place of Supply - Goods Example 1: T Sdn Bhd which is located in Malaysia, imported one container of mandarin oranges from a supplier who located in China. This supply is a supply from a place outside Malaysia to a place in Malaysia. This transaction is an importation of goods and thus, is subject to GST at the point of import. Example 2: A toll manufacturer carries out drop shipment of goods processed or treated by him to a local customer of his overseas principal on the instruction of the overseas principal; the place of supply for the drop shipment of goods is in Malaysia 33

34 Place of Supply - Services Supplier belongs in Malaysia he has in that country a business establishment or fixed establishment and no such establishment elsewhere he has no such establishment in any country, but his usual place of residence is in that country; or he has such establishments both in that country and elsewhere and his establishment which is most directly concerned with the supply is in that country Recipient belongs in Malaysia he has in that country a business establishment or fixed establishment and no such establishment elsewhere he has no such establishment in any country, but his usual place of residence is in that country; or he has such establishments both in that country and elsewhere and his establishment which is most directly concerned with the supply is in that country 34

35 Place of Supply - Services Supplier belongs Recipient belongs Place of supply GST treatment Malaysia Malaysia In Malaysia Standard rated Malaysia Overseas In Malaysia Zero rated Overseas Overseas Outside Malaysia Overseas Malaysia Deemed supplied in Malaysia Out of scope Reverse charge mechanism 35

36 Place of Supply - Services Example 1: A firm located in Malaysia provides engineering services to a highway construction project in Mumbai to a company located in India. The supply of services is treated as made in Malaysia because the firm belongs in Malaysia. Since such supply is made in Malaysia to a company who belongs in India, it is treated as an export of services and subject to GST at zero rate. Example 2 : Malaysian company is awarded a contract overseas and set up a business establishment overseas. The services are provided there by its overseas establishment. The supply of services is outside Malaysia. Since the supply is made outside Malaysia to a company who belongs outside Malaysia, it is treated as out of scope. 36

37 9) Time of supply 37

38 Time of supply Earliest of the following dates : When goods are removed or made available, or when the services are performed or Receipt of payment or Issuance of tax invoice * * 21 day rule if tax invoice is issued within 21 days from (1) and no payment received before basic tax point, date of invoice is taken as time of supply 38

39 21 day rule Time of supply 15 July 25 July 1 September Goods removed / services performed BASIC TAX POINT Tax invoice issued (within 21 days) ACTUAL TAX POINT If tax invoice issued more than 21 days * * Time of supply : if tax invoice is issued after 21 days from the basic tax point, the time of supply will fall back to the basic tax point 39

40 Example: Time of supply 7 April April April 2015 Delivered goods/services performed BASIC TAX POINT Part payment received RM848 Tax invoice issued RM1,060 * Time of supply: Tax invoice is issued within 21 days from the basic tax point, the time of supply will be the date of tax invoice 40

41 Time of supply Example: 2 Oct Nov Nov Dec 2015 Part payment received RM5,000 Tax invoice issued RM10,600 Balance of payment received RM5,600 Delivers goods to customer/services performed (BASIC TAX POINT) Time of supply: (i) 2 October 2015 (RM5,000 x 6/106) = RM283 (ii) 6 November 2015 (RM5,600 x 6/106) = RM317 41

42 Time of supply Time of supply under special circumstances Type of supply Transfer or disposal of business assets Private use of business assets Imported services Goods on consignment Continuous supply of services/retention sum payment Free service to connected persons Time of supply Time when the goods are transferred or disposed When the goods are appropriated to the use When the recipient pays for the services Date when the sale becomes certain Earlier of : Tax invoice issued; or payment received When the service is performed 42

43 Time of supply Continuous supplies of services When a supplier supplies services on a continuous basis for a consideration, and receives whole or part of payments periodically or from time to time. The time of supply for such services is at the earlier of the following: (i) when the tax invoice issued; or (ii) when payment is received. 43

44 Time of supply Retention payment When a customer withholds a percentage of the payment to the supplier until the satisfaction of conditions specified in the contract. The amount withheld is termed as retention payment and is not subject to GST until the money is released to the supplier. For retention of any part of a consideration by a person pending full and satisfactory performance of the contract, or any part of it, by the supplier, the time of supply of such supply is the earliest of the following: (i) when the tax invoice issued; or (ii) when payment is received. 44

45 Time of supply Example: A project costs RM100,000 and the contractor has completed the project. In his billing, he will have to account for GST as below: Amount (RM) Value of contract works 100,000 Less: Retention payment (5%) (5,000) Payment due 95,000 GST payable 5,700 The contractor has to account for GST when he receives the amount of retention payment of RM5,000 or when he issues an invoice relating to the retention sum, whichever is earlier. The amount of GST payable is RM

46 Time of supply Payment related to intellectual property The time of supply of such services is the earlier of the following: (i) (ii) when payment in respect of the use of the benefit of the services is received, or when tax invoice is issued by the supplier. However, if a further supply takes place and the consideration of the supply is not ascertainable at the time when the services are supplied, the time of supply is the earlier of the following: (i) (ii) when a payment is received; or when a tax invoice is issued. 46

47 Time of supply Example Cutie Garment Sdn Bhd (Cutie) enters into a contract with Comicku Baby Clothing Sdn Bhd (Comicku) which allows Cutie the rights to use Comicku patent on Cutie clothing for two years (2014 and 2015). In return Cutie has to pay RM104,000 monthly patent fees to Comicku and additional 2% of royalty payment from Cutie sales. Cutie sales for 2014 is RM10million and 2015 is RM20million, as such Cutie have to pay Comicku RM200,000 and RM400,000 royalty for 2014 and 2015 respectively. Comicku have to account for GST when they issue the tax invoice for the monthly patent fees of RM104,000. Comicku will have to account for GST subsequently when they receive the payment of royalty of RM200,000 and RM400,000 or issued tax invoice for the payment of royalty. 47

48 10) VALUE OF SUPPLY 48

49 Value of Supply Consideration General Rule Value = consideration GST portion Imported goods Value = customs value + custom duty + excise duty Imported services Value = Consideration paid No consideration Value = OMV GST portion Open market value ( OMV ) - Arm s length price supplied to an unconnected person Note : If value expressed in foreign currency, it must be converted to RM: At the daily exchange rate (selling rate) of any banks operating in Malaysia; or At the rate of exchange determined by the Customs in the case of imports of goods (Customs will issue foreign exchange rate weekly) 49

50 Value of Supply Application of OMV Disposal of business asset without consideration Private use of business asset without consideration Supply of business asset not for a consideration to connected person * Value of supply OMV of that supply OMV of the services OMV of the services * Connected person Officers or directors of one another s business Partners in business Person holding 5% or more of the outstanding voting stock/share One of them directly or indirectly controls the other Both of them directly or indirectly controlled by a third person Together they directly or indirectly control a third person Members of same family 50

51 Value of supply Hierarchy of OMV a. Consideration in money which goods/services generally fetch if supplied substantially, under the same circumstances at or about the same time in Malaysia, being a supply freely offered and made between persons who are not connected b. If cannot determine under (a), OMV is the value of similar supply in Malaysia c. If cannot determine under (a) or (b), the OMV is determined using reasonable means which provides objective approximation of the consideration in money 51

52 Value of supply Example: A customer purchased a printer and pays the supplier by exchanging his used computer for the printer. The open market value of the used computer is RM260. Hence, the value of the printer is the open market value of the used computer less tax i.e RM (RM260 x 100/106) 52

53 11) Accounting entry for supply 53

54 Accounting entry for supply DR CR Receivables / bank 159,000 Sales 150,000 Output tax 6% 9,000 54