Manufacturing GST FOR BUSINESSES. Date: 17 July 2014 Venue: Dewan Perdana MIDA MIDA Sentral Presenter: Fazilah Ariff BAHAGIAN CUKAI

Transcription

1 GST FOR BUSINESSES Manufacturing Date: 17 July 2014 Venue: Dewan Perdana MIDA MIDA Sentral Presenter: Fazilah Ariff BAHAGIAN CUKAI KEMENTERIAN KEWANGAN

2 Briefing Agenda 1. GST Treatment on Manufacturing 2. Matters related to Manufacturing 3. Facilities for Manufacturers 4. Business preparation 2

3 1 GST Treatment on Manufacturing 3

4 Manufacturing INPUT Goods (raw materials, machines and other goods) Services (rental telephone and insurance) Utilities (electricity and water) Manufacturing OUTPUT Goods (e.g. furniture, tableware, television) Services ( e.g. loan of mould GST on inputs = Input tax Claimed input tax GST on outputs = Output tax 4

5 Registration Liable to register for GST making taxable supplies of goods or services in Malaysia; and business taxable turnover has exceeded the prescribed threshold (RM 500,000 per year)..section 20 5

6 Registration Exemption from registration for those who are making wholly zero rated supplies Example: Sugar refiner, Flour Manufacturer Must apply GST-Adm3 form If approved, input tax incurred CANNOT be claimed Must notify DG of any change in nature of supply within 30 days from the date of change e.g. makes standard rated and zero rated supplies tapioca flour (6%), plain flour (0%).section 32

7 GST Treatment on Supplies Made Generally all supplies made by manufacturers are taxable supplies, - standard rated supplies - zero rated supplies => Subject to GST on the supplies Input tax is claimable on the acquisitions

8 GST Treatment on Supplies Made Taxable supplies sale of goods (manufacturing products such as tableware, furniture, cooking oil and other goods scrap, used mould, used equipment/machine, ) provision of services (loan of mould) sub-contract work loan of raw materials business assets put to private use gifts exceeding RM500 8

9 FIZ & LMW Concept Under GST, both FIZ and LMW are to be regarded as places located in Malaysia Physical control procedures will be revised to be in line with the tax treatment under GST Records are not required to be submitted monthly but must be made available as and when required by Customs Auditing by Customs will be done at random based on Risk Management System (RMS) 9

10 GST Treatments on FIZ & LMW Supplies made by FIZ & LMW: export is subject to zero rated local sales is subject to GST Procedures for local sales goods need to be declared in Customs Forms and subject to customs duties (if any) GST on local sales has to be imposed and charged in the tax invoice issued to the buyers: If sales to FIZ/LMW companies, the value is based on transaction value If sales to non-fiz/ non-lmw, the value is based on value of imported goods which include customs duties(if any) 10

11 GST Treatment on Supplies Made Supplies made by LMW/FIZ company: To LMW/ FIZ company subject to GST transaction value LMW/FIZ GST LMW/FIZ Example Transaction value : RM100, GST 6% : transaction value : RM100, X 6% : RM6,

12 Special Valuation on Supplies Made Special Valuation for goods supplied locally Where a taxable supply of goods is made by a person under section 65A of the Customs Act 1967 or a person operating in a free industrial zone under paragraph 10(1)(b) of the Free Zone 1990 to any person who is not licensed under section 65A of the Customs Act 1967 or to any person who is not operating in a FIZ under paragraph 10(1)(b) of the Free Zones Act 1990, the value of the goods shall be the value as determined under section 16.. Paragraph 7 of the Third Schedule of GST Act

13 GST Treatment LMW Supplies made by LMW/FIZ company: To non- LMW/ non-fiz subject to GST - the value of the goods is the value of imported goods LMW/FIZ GST Non-FIZ / Non-LMW 13

14 GST Treatment Special Valuation Example ABC Electronics Sdn Bhd (a company in FIZ) sold a consignment of car audio to MAC Sdn. Bhd (non-fiz/non-lmw) at a price of RM100, (Assuming duty import =10% and GST= 6%). Transaction value : RM100, Import duty (100,000 x 10%) : RM10, GST 6% : Customs value + Import Duty : (RM100, RM10,000) X 6% : RM6,

15 GST Treatment Local Supply Supply made by LMW to non-fiz /non-lmw company Import duty must be paid in Customs no.1 form GST must be charged in a tax invoice and must be paid in GST return in the relevant taxable period (a) Customs no.1 form Item Description of goods Unit Value (RM) 1. Car audio 100 pcs 100, Import Duty (10%) 10,

16 GST Treatment Local Supply (b) GST on local sales charged in a tax invoice ABC Electronics Sdn Bhd Lot XX, Jalan YY, Sg Way, Petaling Jaya Selangor MAC Sdn Bhd Jalan CC, Johor Baru, Johor TAX INVOICE GST No: Invoice No: 007 Date: Item Description Of Supply Unit Price (RM) Total (RM) 100 pcs Car audio GST on value + Import 6% on RM110, , , TOTAL AMOUNT PAYABLE 116,

17 FIZ & LMW Concept Current treatments Under the Sales Tax legislation, FIZs and LMWs are deemed to be a placed outside Malaysia GST Treatments For GST, it is treated as a place located in Malaysia. Local sales made by FIZs and LMWs are as if importation into Malaysia For GST, it is considered as local supplies and subject to normal rules. For documentary control, LMWs are required to submit monthly records but not for FIZs. For GST, FIZs and LMWs who are approved under the special schemes (ATS/ATMS) are required to submit certain records. 17

18 FIZ & LMW Concept Current treatments Importations of raw materials and machineries directly used for manufacturing are eligible for customs duties / sales tax exemptions. Importations or acquisitions of goods indirect used for manufacturing purposes eg stationaries, tires and office equipments are subject to tax. GST Treatments GST on importations of goods including raw materials and machineries or locally acquisitions in the course or furtherance of businesses are subject to GST. GST on inputs are claimable. GST on importation of goods is suspended under ATS Auditing by Customs will be done at random based on risk criteria. Auditing by Customs will be done at random based on Risk Management System (RMS) Records need to kept for 6 years Records need to be kept for 7 years 18

19 LMW COMPANIES SEC.65/65A CUSTOMS ACT 1967 IMPORT/EXPORT/LOCAL SALES PROCEDURES INPUT - Raw materials / components - Machines / equipments IMPORT EXEMPTION; Import Duty Excise Duty GST on importations (6%) suspended under ATS Local Supplier FIZ LMW Others Subject to GST; Standard rate LMW Company GST REGISTRANT / ATS GST incurred for making taxable supplies -Claimable OUTPUT EXPORT DA FCZ (outright export) Zero rate LMW / FIZ /FCZ Subject to GST Standard rate LOCAL SALES 19

20 GST Treatment LMW/FIZ GST treatment for LMW/FIZ Supply World to LMW/ FIZ: Goods Services Between the LMW/FIZ: Goods and Services GST Treatment *Suspended Standard Rate Standard Rate FIZ to World: Goods and Services Zero Rate * Under Approved Trader Scheme (ATS) - Subject to DG approval 20

21 GST Treatment LMW/FIZ Supply Non-LMW/non-FIZ to LMW/FIZ: Goods Services GST Treatment Standard rate Standard rate LMW/FIZ to non-lmw/non-fiz: Goods Services *Standard rate Standard rate * GST on value of imported goods 21

22 2 Matters related to Manufacturing 22

23 Farming Out Within Malaysia No transfer of ownership of goods not a supply of goods Sub-contractor to account for GST on value of services supplied Supply of services Finished goods and charged RM15,000 for labour Returned ABC SDN. BHD. (GST registered person) XYZ SDN. BHD. (GST registered person) Farmed out Raw materials valued at RM 100,000 23

24 Farming out Outside Malaysia No GST on goods returned If new parts are added GST will be imposed (similar to item 51 of the Customs Duties (Exemption Order) GST is allowed to be suspended under ATS ABC SDN. BHD. (GST registered person) Farmed out Finished goods and charged RM15,000 for workmanship Raw materials valued at RM 100,000 Returned ALLAN PTE LTD 24

25 Warranty Manufacturer s warranty normally includes: Warranty, Discount and gift the charge for after sale services and repairs any replacement of spare-parts free of charge during the warranty period Services and replacement of parts free of charge, not subject to GST Discount Discount is allowed Gift Gift of goods not more than RM500 made in the course or furtherance of business to the same person in the same year not subject to GST 25

26 Disposal of assets Sale of capital assets, other than TOGC subject to GST Sale of assets as TOGC not subject to GST (not a supply) Given free the value will be the open market value subject to GST Sell as scrap the value will be the sale value of scrap subject to GST Destroyed, no commercial value or not economic to sell not subject to GST (not a supply) 26

27 Employee Benefits Employees benefit include any right, privilege, service or facility provided free of charge to employees Employee benefits stated in the contract of employment, not subject to GST If not stated in the contract of employment: Goods provided free to the employees, subject to GST (subject to gift rule of RM500) except those exempted, blocked input tax or zero rated goods input tax claimable output tax on gifts > RM500 Value to be based on open market value (supply freely offered and made between persons who are not connected persons) 27

28 Employee Benefits Continue Services supplied free no GST Input tax claimable 28

29 Sample Imported trade sample given relief under GST Relief Order Trade samples given for promotion not subject to GST on conditions: packed differently and labelled sample or not for sale samples not packed differently is subject to business gift rules of RM500 29

30 3 Facilities for Manufacturers 30

31 Facilities for Manufacturers Special schemes: Special schemes are introduced to alleviate negative cash flow impact to businesses Approved Trader Scheme (ATS) Approved Toll Manufacturer Scheme (ATMS) Warehousing Scheme (WS) 31

32 Purpose Under ATS Approved Trader Scheme (ATS) A facility to relieve GST payment on importation of goods ATS participants are allowed to suspend GST on the importation of goods Goods imported is used in the course or furtherance of business The amount of GST suspended needs to be declared in the GST return for the taxable period to which the suspension relates GST Regulation provides : Definition Application for approval Eligibility for ATS Goods not eligible for the scheme Commencement and expiry of the scheme Revocation of approval 32 32

33 Approved Trader Scheme Malaysia ATS approval AA Pte Ltd XX Sdn Bhd GST-03 (June 2015) Port (June 2015) Value of imported Goods (CIF + Duty Import )= RM100,000 GST 6%= RM6,000 overseas Total value of goods imported under ATS = RM100,000 Total value of GST suspended= RM6,000 Customs no.1 ATS GST is suspended 33

34 GST Return 34

35 ATS Persons eligible for ATS Companies located within Free Industrial Zone (FIZ) Licensed Manufacturing Warehouse (LMW) International Procurement Centre (IPC) Regional Distribution Centre (RDC) Toll manufacturers under ATMS Jewellery manufacturers under AJS Companies with turnover above RM25 million and at least 80% of their supplies made are zero-rated; or Any other person approved by the Minister 35

36 ATS Approval subject to the following criteria: Must be registered under Sec. 20 of the GST Act 20XX Must make wholly taxable supply Must be a registered user of electronic service Must submit monthly GST return Must make declaration on the importation of goods electronically Must have good compliance record as a GST payer Must have good accounting and internal control system Must furnish security if required; and Any other conditions as may be determined by DG 36

37 ATS Goods not eligible for ATS Liquor, beer, wine and spirits Tobacco and tobacco products Any goods to which input tax credit is disallowed (blocked input tax) Goods for personal use and non- business use 37

38 ATS Administratively the RMC will monitor the approval Application can be made in a Special Scheme Form Status of the applicants Sales turnover and the details of zero-rated supplies per annum Approval would be given for a period of 2 years Approval subject to renewal and notices would be sent 2 months before expiry date. Second notice will be issued 14 days before expiry date The approval of this scheme will be revoked by DG if provided false, misleading or inaccurate declaration ceased to satisfy any eligibility requirements failed to comply any conditions imposed applied to deregister by the approved person 38

39 Purpose a facility to overcome the GST embedded when a person buys goods from an overseas person via a local toll manufacturer Approved Toll Manufacturer Scheme Approved Toll Manufacturer Scheme Any taxable person (Toll Manufacturer) is allowed to disregard the supply of services to the overseas principal (who belongs to a country other than Malaysia) Any person (belongs to Malaysia) who receives the processed goods from the toll manufacturer shall account and pay tax as if he had himself supplied and acquired the goods in the course or furtherance of his business GST Regulation provides: Definition Application for approval Eligibility for ATMS Commencement and expiry of the scheme Revocation of approval 39

40 ATMS - concept Overseas principal invoices local customer on finished goods received Overseas Principal TM imports consigned goods from the overseas principal (ATS) TM invoices overseas principal for valueadded services (SR) -disregarded Malaysia Local Customer ecipient accounting 2. TM drop-ships finished goods to local customer of overseas principal Toll Manufacturer Local supplier deliver goods on behalf of OP (ZR) Local supplier 40

41 ATMS Eligibility for approved under the ATMS Any toll manufacturer who has contract(s) with overseas principal who is not belong in Malaysia i.e. he is not a taxable person He carries out value added activities with the overseas principal: worth RM2 million or more (excluding the cost of raw materials supplied or belonging to the overseas principal) per annum; and 80% of the processed goods must be exported; What types of value added activities allowed under ATMS? related to manufacturing, treatment, processing, finishing, assembling and other manufacturing-related works on consigned goods 41

42 ATMS GST treatment for ATMS Supply of services by toll manufacturer (TM) to overseas principal (processing charges/toll) to be disregarded TM delivered the processed goods on behalf of his overseas principal to the local customer Supply of processed goods by overseas principal to the local customer not subject to GST Local customer whether registered or not has to account for the GST by way of recipient accounting..processed goods received from the TM shall account and pay tax as if he had himself supply the goods and acquired the goods in the course of furtherance his business. Acquisition of goods by overseas principal Local supplies delivered to the toll manufacturer under the account of overseas principal is zero rated 42

43 Time of supply to account for GST under ATMS The tax on the supply of the treated or processed goods received need to be accounted based on the following (whichever is earlier): (a) (b) ATMS Time of Supply When a payment in respect of the supply is made; or When the recipient receives an invoice from oversea principal relating to the supply Accounting of GST under ATMS The supply is made by overseas principal Local customer (registered person & non-registered person ) will account for output tax on the processed goods received by way of Recipient Accounting Registered person GST return (GST-03) Non-Registered person prescribed form (GST-04) 43

44 ATMS Example: Recipient Accounting A Toll Manufacturer (A) approved under ATMS delivers processed goods on behalf of overseas principal to the local customer (B) on 29 April The Overseas principal issued an invoice to local Customer (B) with the amount of RM200, on 5 May 2015 How to account for the tax? Local Customer (registered person) Needs to account the tax amounting RM12,000 (6%XRM200,000.00) in his GST return. GST Return - May 2015(GST-03) OUTPUT TAX = RM12,000 Local customer (not a registered person) Needs to account the tax not later than the last day of the subsequent month from the month in which the supply is made Value of supply *GST No.4 - May 2015 RM200, INPUT TAX = RM12,000 NET TAX = 0.00 GST amount payable RM12, *Return for non-registrant 44

45 ATMS Approval subject to the following criteria: Must be registered under Sec. 20 of the GST Act Must be a registered user of electronic service Must submit monthly GST return Must have good compliance record as a GST payer Must have good accounting and internal control system Must furnish security if required; and Any other conditions as may be determined by DG 45

46 ATMS Administratively the RMC will monitor the approval Application can be made in a Special Scheme Form Details of the Toll Manufacturer Details of overseas principals and the contracts Details of the local customers Approval would be given for a period of 2 years Approval subject to renewal and notices would be sent 2 months before expiry date. Second notice will be issued 14 days before expiry date The approval of this scheme will be revoked by DG if provided false, misleading or inaccurate declaration ceased to satisfy any eligibility requirements failed to comply any conditions imposed applied to deregister by the approved person 46

47 Warehousing Scheme (WS) Under WS Importer/owner of the imported goods is allowed to suspend the payment of GST at the time of importation on goods imported and deposited in a warehouse. The imported goods will be subject to GST when it triggers the duty point that is the time when such imported goods are taken out from the warehouse. The value of the imported goods is its customs value. 47

48 WS concept GST suspended on goods imported and deposited into a warehouse Supplies made within a warehouse is disregarded Warehouse A GST suspended on removal of goods from a warehouse to another warehouse Goods and services consumed in a warehouse are standard rated Warehouse B Duty point Goods released to local market standard rate Goods released to overseas - zero rate Overseas Malaysia 48

49 WS GST on goods deposited into the warehouse to be suspended GST on goods moved from one warehouse to another warehouse to be suspended Intermediate supplies within a warehouse to be disregarded The last supply is subject to GST (trigger the duty point) Goods released to local market to be subjected to GST Goods released to overseas market to be zero- rated All goods and services consumed in warehouse to be standard-rated 49

50 Example WS Daim Sdn Bhd keeps his imported goods in a warehouse approved under section 65 of the Customs Act. One of his customers has agreed to buy certain goods at RM10, and the goods are to be taken out from the warehouse. How does his customer determine the value of the last supply? (Prevailing import duty rate = 10% and GST = 6%) 50

51 WS *Value of supply = RM 10, Rate of import duty = 10% Total duty import payable = RM (10%X RM10,000.00) Daim Sdn Bhd s customer needs to declare the following amount: Value for customs purposes = RM 10, Import duty (10%) = RM 1, Total value for calculating GST = RM 11, GST Payable (6% x RM11,000) = RM * 51

52 GST Implementation Approach To implement a GST compliant system GST Project Team 1 st phase 2 nd phase 3 rd phase Develop implementation plan Implementation and execute Post implementation Key areas requiring attention Tax regulatory compliance Documentation and system Legal and transitional issues Education and training Vendor and supplier communication 52

53 MAPPING TRANSACTIONS DEPARTMENT Finance, Administration and Legal Marketing and Sales Cash flow impact and cash optimisation Compliance cost and budgeting Review legal contracts and documents Maximise claim for input tax Claim special refund Monitor bad debts Get the correct appropriate registration Apply for special schemes Cancel sales tax and service tax licence Effect on prices Tax invoice Credit terms ACTION TO BE TAKEN Purchasing IT Corporate Strategy Staff Supplier selection Document for input tax claim Accounting system Optimise business model Optimise corporate structure Staff training GST Project Team 53

54 BUSINESS PREPARATION FOR GST General Comment from countries implemented GST / VAT on compliance: There are no major compliance problems. Taxpayers have generally been compliant and most of the errors uncovered stem from a lack of awareness of GST obligations or an inadequate understanding of GST rules. Wish List: 1. Both business community and Government are well -prepared to implement GST 2. Implementation problems are minimized 3. Minimum impact on prices of goods and services 4. Public accept GST implementation 54

55 Thank You Fazilah Ariff 55

56 Thank you Royal Malaysian Customs Ministry of Finance Malaysia 56

57 Comments and Enquiries i) BAHAGIAN CUKAI Komplek Kementerian Kewangan, No.5, Persiaran Perdana, Pusat Pentadbiran Kerajaan Persekutuan Malaysia, PUTRAJAYA. Tel : ii) GST PORTAL iii) Customs Call Centre (CCC) Tel: Fax: ccc@customs.gov.my 57