GST General Framework and GST Treatment on Manufacturing Sector (FIZ /LMW)

Transcription

1 GST General Framework and GST Treatment on Manufacturing Sector (FIZ /LMW) 27 February 2014 GST UNIT ROYAL MALAYSIAN CUSTOMS 1

2 Briefing Agenda 1. GST Framework: What is the Proposed GST Model. 2. GST Treatment on Manufacturing Sector (FIZ / LMW Co.) 3. Registration Requirement. 2

3 1 GST FRAMEWORK : PROPOSED GST MODEL 3 9

4 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 OUTPUT Raw materials, rents, electricity, furniture, professional services etc. Business Goods Services GST on inputs Claimed input tax GST on outputs = Input tax = Output tax 4

5 What is GST? Types of supply Output tax Input tax Standard-rated 6% Claimable Zero-rated 0% Claimable Exempt No GST Not claimable 5

6 To replace current tax system Proposed GST Model 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 6

7 Proposed GST Model (Zero-rate Supply) Agriculture products paddy & fresh vegetables Foodstuff rice, sugar, table salt, plain flour, cooking oil 0% Livestock supplies meat, muttons, swine Fish, prawn, cuttlefish, crabs, oyster, cockles, etc. Poultry & eggs Supply of the first 200 units of electricity to domestic users Supply of water to domestic users. Exported goods and services 7

8 Proposed GST Model (Exempt supply) GST Public Transportation - Rail, Bus, Taxi and Ferry Highway toll Land for residential, agriculture and general use Accommodation (28 days) Funeral in a package Private health & education Financial services 22

9 Proposed GST Model (Supply by Government) 9

10 2 GST Treatment on Manufacturing Sector (LMW / FIZ) 10 9

11 Supply of Goods : Sales Tax vs GST Sales Tax vs GST Sales Tax Act 1972 FIZ / LMW are deemed to be a place outside Malaysia. Therefore goods sold to FIZ/LMW are considered export. GST System Both FIZ and LMW companies are treated as a place inside Malaysia and normal GST rules apply. Customs procedures imposed for LMW/FIZ companies will be maintained. 11

12 GST Treatment on FIZ/LMW GST Treatment on activities of Manufacturing Companies (FIZ and LMW) - Typical Activities - Purchase of goods (raw materials/components /machines etc) - Sales of Finished Goods - Outsourcing / Sub-contract works 13

13 2.1 GST TREATMENT ON MANUFACTURING INPUTS: (PURCHASES) 14 9

14 GST Treatment Purchases GST Treatment on Purchases of Raw Material / Machinery Imports Local Purchase Hire Purchase Lease 15

15 GST Treatment Purchases Importation Generally all goods imported by manufacturers are subject to GST. Under Approved Traders Scheme (ATS) ATS participants are allowed to suspend GST on the importation of goods. GST due on all goods imported in a particular month needs to be declared in the GST return according to the taxable period (the month where importations take place) ATS participant must be on a monthly taxable period. Note: A suspended GST under the Approved Trader Scheme (ATS) was introduced to alleviate the cash flow problem faced by importers who mainly re-export their supplies. 16

16 Approved Traders Scheme (ATS) Persons eligible for ATS Companies with FIZ / LMW status 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 Any other person approved by the Minister 18

17 Warehousing Scheme Under Warehousing Scheme 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 last supply shall be treated as including any duties (whether customs duty or excise duty or both, if any). 19

18 Supply of Goods : Sales Tax vs GST Warehousing Scheme 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 20

19 GST Treatment Purchases GST Treatment on Local Purchases Local purchases of raw materials by manufacturing companies are subject to GST. Payment of GST is required upfront on local purchases and ATS cannot be used to suspend GST. All manufacturing companies are allowed to claim ITC for expenses that are related to their business. ITC can be claimed once Tax Invoice is received for purchases even though payment has not been made. If purchases are made for mixed supplies, use apportionment method to claim ITC for taxable supplies only. 22

20 GST Treatment on Hire Purchase GST Treatment Purchases Under hire purchase agreement, goods are paid by way of instalments to the vendor or a finance company that provides loan for the purchase. If purchases are made under hire purchase agreement, the whole purchase price is subject to GST. If interest incurred in the Hire Purchase Agreement is shown separately, the interest is not subject to GST (exempt supply). Otherwise, the total price including the interest element is chargeable to GST. 23

21 GST Treatment Purchases GST Treatment on goods acquired under Lease A lease is a supply that is made on a progressive or periodic basis for the period of the lease. Two (2) types of Conventional Lease: Financial Lease Manufacturing company has the option to purchase at the end of lease period. Financial institution will charge GST on whole value (does not include interest similar to GST treatment on Hire Purchase). It is a supply of goods. Operating Lease Manufacturing company will only pay GST on each lease payment. Since operating lease is a form of rental service in the manner as an asset is being rented out to a third party, it is a supply of service. 24

22 2.2 GST TREATMENT ON MANUFACTURING OUTPUTS ( SALES ) 25 9

23 GST Treatment Sales GST Treatment on Sales of Finished Goods Local Sales Export Sales 26

24 GST Treatment on Local Sales Taxable Supplies of Goods / SALES made by Licensed Manufacturing Warehouse (LMW) or Free Industrial Zone (FIZ) companies : To another LMW/ FIZ company subject to GST Value of goods supplied (selling price) To non- LMW/ non-fiz subject to GST Based on special valuation under GST legislation Value of goods imported to local market 27

25 GST Treatment Local Sales Supply made to non-fiz or 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. 30

26 GST Treatment - Sales GST Treatment on Export Sales All goods supplied by Manufacturing companies to overseas are zero-rated. Note: Export of goods means sending goods out of the Federation of Malaysia and its territorial waters, but does not include goods in transit. 29

27 2.3 GST TREATMENT ON MANUFACTURING OUTPUTS (FARMING OUT / SUBCONTRACT) 25 9

28 GST Treatment Farming Out i. Farming Out between Malaysian Manufacturers Main Contractor outsource specific job to a subcontractor: 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 (GST 6% = RM900.00) Returned ABC SDN. BHD. (GST registered person) XYZ SDN. BHD. (GST registered person) Farmed out Raw materials valued at RM 100,000 33

29 GST Treatment Farming Out ii. Overseas Principal Contractor To Local Toll Manufacturer (TM) Approved Toll Manufacturer Scheme (ATMS) a scheme which allows any taxable person approved (toll manufacturer) to disregard any value added activity (contract services) on the goods belonging to a person who does not belong in Malaysia (overseas principal). Delivery of processed goods by TM on behalf of his overseas principal to a local customer (registered person & non-registered person ) will be accounted by way of Recipient Self-Accounting Registered person GST return (form GST-03) Non-Registered person GST return (form GST-05) Local supplies delivered to the toll manufacturer under the account of overseas principal is zero rate 34

30 GST Treatment Farming Out Persons eligible for ATMS Any toll manufacturer who has contract(s) with overseas principal(s) to carry out value added activities 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 37

31 GST Treatment Farming Out iii. Semi-finished goods sent by Manufacturing Companies in Malaysia to an oversea sub-contractor. Semi-finished goods sent to oversea sub-contractor will be treated as exports ie. Zero-rated supplies. When goods are subsequently returned from overseas after the sub-contract, relief can be claimed under the GST (Relief) Order. However, GST is chargeable on the parts or components added on the processed goods (ITC claimable). Any value-added services performed on the consigned goods overseas does not attract customs duty or GST. 39

32 Proposed GST Model (Special Schemes) To provide cash flow relief to businesses Approved Trader Scheme facility given to major exporters where GST on imports is suspended Approved Toll Manufacturer Scheme facility given to local toll manufacturer to disregard tax on value added activities Warehousing Scheme GST suspended in public and private warehouse 40

33 3 GST REGISTRATION 41 9

34 Registration Before Appointed Date Liable to be registered if a person makes taxable supplies of goods and services in Malaysia; where the annual taxable turnover exceeds RM500,

35 Taxable Turnover Registration Before Appointed Date Includes standard rated supplies zero rated supplies deemed supplies such as private use, fringe benefit, etc. Excludes exempt Supplies sale of capital assets imported services 43

36 registration exercise begins 6 months before the appointed date persons liable must register 3 months before the appointed date commit an offence if fail to register registration either electronically or manually use GST-01 Registration Before Appointed Date GST registration number issued upon registration effective date is from the appointed date 44

37 Voluntary registration for businesses below threshold must remain registered for at least 2 years Other types of registration branches or divisional registration group registration group of companies registration of foreigners appointment of agent GST Registration 45

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39 GST PORTAL Resources and Guides 1. General Guide 2. Industry Guides 3. Specific Guides LINK: General Guide / Industry Guides / Specific Guides 47

40 Thank You For Enquiries, please contact: Wan Leng Whatt GST Unit 2111 Royal Malaysian Customs Department Tel: Fax: