21 FEBRUARY 2014 GOODS & SERVICES TAX PREVIEW OF 1 APRIL 2015 IMPLEMENTATION PREPARED EXCLUSIVELY FOR CLIENTS, ASSOCIATES AND STAFF OF SE LAI CK AND ITS AFFILIATES BizComm Tax Sdn Bhd (839888-H)
INDEX CONTENTS PAGE Glossary 1.0 PREAMBLE 1 2.0 GST AN OVERVIEW 2 3.0 SCOPE OF GST 3.1 SCOPE OF GST 3 3.2 WHO CAN CHARGE GST 3 3.3 BUSINESS UNDER GST 4 3.4 WHAT IS MADE IN MALAYSIA 5 4.0 REGISTRATION FOR GST 4.1 LIABILITY TO REGISTER 6 4.2 DETERMINATION OF 12-MONTHS PERIOD 6 4.3 EFFECTIVE DATE OF MANDATORY REGISTRATION 7 4.4 VOLUNTARY REGISTRATION 7 4.5 GROUP REGISTRATION 8 4.6 REGISTRATION OF BRANCHES OR DIVISIONS 8 4.7 REGISTRATIONS FOR OTHER TAXABLE PERSONS 9 4.8 RESPONSIBILITIES OF A REGISTERED PERSON 9 4.9 APPLICATION FOR GST REGISTRATION 9 4.10 CESSATION OF LIABILITY TO BE REGISTERED 10 4.11 OTHER REGISTRATION PROVISIONS 10 5.0 GST ADMINISTRATION 5.1 TAXABLE PERIOD 11 5.2 ACCOUNTING BASIS 11 5.3 GST RETURN AND PAYMENT OF TAX 11 6.0 INPUT TAX CREDIT 6.1 INPUT TAX CLAIMABLE AS CREDIT AGAINST OUTPUT TAX 13 6.2 ALLOWABLE INPUT TAX 13 6.3 CRITERIA FOR CLAIMING INPUT TAX 13 7.0 GST AUDIT 14 SE Lai CK Page i
INDEX CONTENTS PAGE 8.0 ILLUSTRATIONS OF HOW GST WORKS 8.1 ILLUSTRATION STANDARD-RATED (6%) SUPPLIES 15 8.2 ILLUSTRATION ZERO-RATED SUPPLIES 16 8.3 ILLUSTRATION EXEMPT SUPPLIES 17 9.0 TRANSITIONAL RULES FROM SALES/SERVICE TAX TO GST 9.1 GENERAL RULE 18 9.2 SALES TAX 18 9.3 SERVICE TAX 19 9.4 BAD DEBT RELIEF 19 9.5 OTHER TRANSITIONAL PROVISIONS 19 10.0 SPECIAL RULES 20 11.0 SPECIAL SCHEMES 23 ANNEXURES A. GST GENERAL/SPECIFIC GUIDELINES (AS AT 21 FEB 2014) B. GST INDUSTRY GUIDELINES (AS AT 21 FEB 2014) SE Lai CK Page ii
INDEX Glossary Exempted Supply GST GST Act Input Tax Output Tax Registered Person RMC Supply of goods or services which are exempted from GST Listed under the [GST (Exempt Supplies) Order 20XX*] Goods and Services Tax (as proposed by the Malaysian Government) in Budget 2014 Goods and Services Tax Act, 20XX** GST incurred by a Taxable Person on business purchases GST charged by a Taxable Person on Taxable Supplies made or provided by him Person registered under the GST Act Royal Malaysian Customs Standard-Rated Taxable Supplies subject to the standard GST rate of 6% Supplies Taxable Person Person, who makes Taxable Supplies with annual Taxable Turnover > RM500,000, and is required to be registered under the GST Act Taxable Period Taxable Supply Taxable Turnover Assigned period for accounting/submission of GST of either one month or three months Supply of goods or services other than an Exempt Supply. GST charged on Taxable Supply at either the Standard-Rate (6%) or Zero-Rate (0%) Value of Taxable Supplies over a 12-months period Zero-Rated Supply Taxable Supplies subject to a GST rate of 0% Listed under the [GST (Zero-Rate Supplies) Order 20XX*] ** Subject to gazette by the Ministry SE Lai CK Page iii
GOODS AND SERVICES TAX IMPLEMENTATION - 1 APRIL 2015 AX (GST) 1.0.0 PREAMBLE 1.1.0 BUDGET 2014 proposes that GST be implemented from 1 APRIL 2015. 1.2.0 This GST Review Paper is prepared based on the Budget 2014 proposals, and GST Guidelines issued by the Royal Malaysian Customs (RMC), issued as at 21 February 2014. In particular, the following principal GST Guidelines are referred to in the compilation of this Review Paper: GST General/Specific Guidelines Version General Guide 27 Oct 2013 Transitional Rules 28 Oct 2013 1.3.0 This GST Review Paper provides an overview of the proposed GST implementation in Malaysia, and should not be construed in any way, to represent a detailed implementation guide. 1.4.0 Users are strongly advised that they should endeavour to gain a comprehensive understanding of the relevant and specific GST Guidelines applicable to their business or to seek appropriate implementation support from duly certified GST Consultants. 1.5.0 The RMC s website portal on GST, which provides comprehensive guidance on the implementation of GST and its impact on consumers and business, can be assessed at: http://gst.customs.gov.my 1.6.0 A comprehensive list of GST General, Specific and Industry Guidelines issued by the RMC as at 21 February 2014 is provided in ANNEXURES A and B attached. SE Lai CK Page 1
2.0.0 GST AN OVERVIEW Overview GST Model o Broad-based, multi-stage tax on final consumption. o Covers all sectors of the economy o Collection through a credit system where GST incurred on inputs (Input Tax Credit) is offset against GST charged on output. Implementation 1 April 2015 GST Standard Rate 6% Exempted goods o Basic food items such as rice, sugar, salt, flour, cooking oil, lentils, herbs and spices, salted fish, cencalok, budu and belacan o Utilities such as piped water supply and 1 st 200 units of electricity per month for domestic consumers o Services provided by Government o Transportation services such as bus, train, LRT, taxi, ferry, boat, highway toll o Education o Health services o Sale, purchase and rental of residential properties o Selected financial services SE Lai CK Page 2
3.0.0 SCOPE OF GST 3.1.0 WHAT IS SUBJECT TO GST? 3.1.1 GST is charged on: Any Taxable Supply of goods and services made/provided in the course of any business by a Taxable Person in Malaysia. Importation of goods and services into Malaysia Goods GST charged at time of importation Services GST charged based on the reverse charge mechanism (Recipient account for GST as if he had supplied the services to himself). 3.1.2 Taxable Supply A Taxable Supply is a supply of goods or services other than an Exempt Supply. Can either Standard-Rated (6%) or Zero-Rated (0%). (c) Zero-Rated Supply o Suppliers of Zero-Rated goods or services do not charge GST. o However, such suppliers are eligible to claim refunds of GST incurred on inputs. 3.1.3 Exempt Supply Suppliers of Exempted goods or services cannot charge GST. Such suppliers are also NOT eligible to claim refunds of GST incurred on inputs. 3.2.0 WHO CAN CHARGE GST? 3.2.1 Taxable Person (c) Taxable Person is a person who is or is required to be registered under the GST Act. Who makes Taxable Supplies in Malaysia. Whose annual turnover > RM500,000. SE Lai CK Page 3
Note: Person essentially includes everybody: Individuals Federal and State Government Sole proprietor Statutory, local or public authority Partnership Trustee Corporation (companies) Society, club Cooperative Trade union, Any other body, organization, association or group of persons whether corporate or unincorporated Person who is not required to be registered under the GST Act but do so voluntarily 3.3.0 BUSINESS UNDER GST 3.3.1 Business includes any trade, commerce, profession, vocation or any other similar activity, whether or not for pecuniary profit. 3.3.2 Criteria to determine whether an activity qualify as a business for GST purposes: (c) (d) Serious undertaking. Pursued with continuity. Conducted on business principles. Primarily concerned with making supplies for consideration. 3.3.2 Includes: Facilities/services provided by a club, association or management corporation. Admission of persons to any premises for a consideration. 3.3.3 What is NOT business: Holding of shares. Supply of services by employees under contract of employment. SE Lai CK Page 4
3.4.0 WHAT IS MADE IN MALAYSIA? 3.4.1 GST is chargeable in respect of supply of goods or services made in Malaysia. 3.4.2 Goods treated as made in Malaysia if goods are: In Malaysia; or Removed from a place in Malaysia. 3.4.3 Services treated as supplied in Malaysia where the provider of the services belongs in Malaysia, i.e. where the supplier has: (c) A business establishment in Malaysia and no such establishment elsewhere; or No business establishment anywhere, but the country where he usually resides or is legally constituted (for a company) is Malaysia; or Has business establishments in Malaysia and elsewhere, and the country of establishment most directly concerned with the supply is Malaysia. SE Lai CK Page 5
4.0.0 REGISTRATION FOR GST 4.1.0 LIABILITY TO REGISTER Person who makes Taxable Supplies in Malaysia; and Whose annual Taxable Turnover > RM500,000. Note - Taxable Turnover Total value of taxable supplies or services (standard-rated and zero-rated) excluding GST over a 12-months period 4.2.0 DETERMINATION OF 12-MONTHS PERIOD 4.2.1 Historical method Value of Taxable Supplies in: Any month + 11 months immediately before that month Illustration June 2014 April 2015 May 2015 11 months before - RM400,200 RM100,000 Total value of past 12-months to 31 May 2015 RM May 2015 100,000 11 months before (June 2014~April 2015) 400,200 Taxable Turnover exceed threshold from 1 June 2015 Liable to register to GST within 28 days from 1 June 2015 500,200 SE Lai CK Page 6
4.2.2 Future method Value of Taxable Supplies in: Any month + 11 months immediately after that month Illustration May 2015 June 2015 May 2016 RM100,000 11 months after RM400,200 Total value of past 12-months from 31 May 2015 RM June 2015 100,000 Next 11 months (July 2015~May 2016) 400,200 500,200 Taxable Turnover reasonably expected to exceed threshold within the next 11 months from June 2015 Liable to register to GST within 28 days from 1 July 2015 4.3.0 EFFECTIVE DATE OF MANDATORY REGISTRATION 4.3.1 1 st day of the month following the month Taxable Person is required to notify his liability for registration 4.3.2 Illustration 28 June 1 July June 2014 May 2015 2015 2015 RM500,200 Registration Period Effective Date 4.4.0 VOLUNTARY REGISTRATION 4.4.1 Person who makes Taxable Supplies in Malaysia, but whose annual turnover does not exceed the threshold of RM500,000 may apply for voluntary GST registration. 4.4.2 Such voluntary registration shall remain in force for at least two years. SE Lai CK Page 7
4.5.0 GROUP REGISTRATION 4.5.1 Facility to allow related companies to account for GST as a group and to centralise the administration of GST. 4.5.2 Inter-company charges on supplies between members of a GST Group companies are disregarded. 4.5.3 Pre-requisites for Group registration: (c) (d) Each company must be making wholly taxable supplies (a company making incidental exempt supplies is also allowed to be a member of the Group). There is a more than 50% controlling shareholding within the Group. Each company must be registered individually before the Group registration. Members of one GST Group cannot be members of another. 4.5.4 One of the companies will be identified as the Representative Member. 4.5.5 Other provisions: Partnerships/Individuals Partnerships/individuals are not eligible to be members of a GST Group. However, companies controlled by partnerships/individuals are eligible. Foreign companies Foreign companies are not eligible to be members of a GST Group. However, their subsidiaries of registered branches in Malaysia are eligible. 4.6.0 REGISTRATION OF BRANCHES OR DIVISIONS 4.6.1 A GST registered person may apply to have separate registrations for its branches or divisions if there are difficulties in submission of a single return for the business as a whole. 4.6.2 Pre-requisites: (c) (d) Registered person and branches/divisions are making wholly taxable supplies. Registered person is not a member of a GST Group. Each branch/division maintains a separate account and is identifiable by reference to the nature of business or location. Each branch/division has the same taxable period. SE Lai CK Page 8
4.7.0 REGISTRATIONS FOR OTHER TAXABLE PERSONS (Please refer to General GST Guidelines issued by RMC) (c) (d) (e) (f) (g) Transfer of Business as a Going Concern (TOGC). Persons making zero-rated supplies. Agent. Societies and similar organisations. Personal representatives. Single Taxable Person (two or more businesses directed by RMC to be registered under one GST Registration). Joint Ventures. 4.8.0 RESPONSIBILITIES OF A REGISTERED PERSON A Registered Person must comply with the requirements under the GST legislations: (c) (d) (e) (f) Account for GST on Taxable Supplies made and received. Submit GST Return and pay tax by the due date. Issue tax invoice on any Taxable Supply made. Inform RMC of cessation of business within thirty days from date of business cessation. Inform RMC on any changes in address, taxable activity, accounting basis and taxable period. Keep adequate records of business transactions relating to GST (in Malay or English) for seven years. 4.9.0 APPLICATION FOR GST REGISTRATION 4.9.1 Effected through completion and submission of prescribed form GST-01 Can be made online or submitted manually at the nearest RMC office. 4.9.2 RMC will issue: (c) Letter of Approval. GST Registration number. Online ID (for applicants opting for on-line services). SE Lai CK Page 9
4.10.0 CESSATION OF LIABILITY TO BE REGISTERED 4.10.1 A person ceases to be liable for mandatory registration when: That person ceases to make or have intention to make a Taxable Supply in Malaysia; or The value of Taxable Supplies for the next twelve months will not exceed the registration threshold. 4.10.2 RMC to be notified within thirty days from date of the occurrence of the events hereof. 4.10.3 However, obligations as a registered person have to be fulfilled under the approved effective date of cancellation of the GST registration have been issued. 4.11.0 OTHER REGISTRATION PROVISIONS 4.11.1 Late registration Tax due will be collected for a period of not more than six months from the effective date of registration. Penalty of not more than 25% will be imposed on the unpaid tax due. 4.11.2 Refusal for registration Liable to fine of not exceeding RM50,000 or to imprisonment for a term not exceeding three years 4.11.3 Unregistered person Not allowed to charge and collect GST SE Lai CK Page 10
5.0.0 GST ADMINISTRATION 5.1.0 TAXABLE PERIOD Determined based on Annual Taxable Turnover: Category Annual Taxable Turnover Taxable Period A RM5 million and above One month B Less than RM5 million Three months 5.2.0 ACCOUNTING BASIS 5.2.1 Two types of accounting basis are accepted: Generally Invoice basis On application Payment basis 5.2.2 The following Taxable Persons qualifies to apply for payment basis of accounting: Public body; or Certain groups of registered persons due to the nature of business and the nature of accounting system employed, eg: Retailers Restaurant operators Grocery shops Hair salons 5.3.0 GST RETURN AND PAYMENT OF TAX 5.3.1 The GST Return and Tax Payable must be submitted not later than the last day of the month following the end of the Taxable Period. 5.3.2 GST Returns may be submitted: Electronically; or By posting or handover to the GST Processing Center. 5.3.3 GST Returns must be submitted whether or not there is tax to be paid. SE Lai CK Page 11
5.3.4 Tax payments can be made by: (c) (d) Electronic fund transfer (EFT) or Online (Portal bank/gst); Cheques, bank drafts or money/postal orders; At the GST Processing Center; or Designated banks 5.3.5 Penalties for late payment No of days tax remains unpaid Rate of penalty Cumulative 1 30 days 5% 5% 31 60 days 5% 10% 61 90 days 3% 13% 91 120 days 3% 16% 121-150 days 3% 19% 151-180 days 3% 22% 181 days or more 3% 25% SE Lai CK Page 12
6.0.0 INPUT TAX CREDIT 6.1.0 INPUT TAX CLAIMABLE AS CREDIT AGAINST OUTPUT TAX 6.1.1 Claims for Input Tax are made in the GST returns during the respective Taxable Periods by offsetting against the Output Tax. 6.1.2 A refund will be made by the RMC where Input Tax > Output Tax as follows: Online submissions Within 14 working days Manual submissions Within 28 working days 6.1.3 Input Tax may be claimed within 6 years after the date of the supply to or importation by the Taxable Person. 6.2.0 ALLOWABLE INPUT TAX Input Tax on the following supplies are claimable: (c) (d) (e) Taxable Supplies (Standard-Rated or Zero-Rated). Supplies between group members in GST Group. Imported supplies which would be Taxable Supplies if made in Malaysia. Supplies given relief. Incidental Exempt Supplies (eg. Inter-company loan/loan to staff). 6.3.0 CRITERIA FOR CLAIMING INPUT TAX (c) (d) (e) Claimant is a Taxable Person. Supplies are acquired for business purposes. Supplies are acquired for making Taxable Supplies. There is a valid Tax Invoice issued under the name of the Claimant. Supplies not subject to Input Tax restrictions: Passenger motor vehicle (supply to, import or hiring). Family benefits. Medical and PA insurance premium (for business owner or employees). Medical expenses (for business owner or employees). Club subscription fees (joining, subscription, transfer fees etc.). Entertain expenses to person other than employees or existing customers. SE Lai CK Page 13
7.0.0 GST AUDIT 7.1.0 GST Audits will be carried out by RMC at the Taxable Person s premises periodically. 7.2.0 The audits may cover periods of 3 to 6 years, but may extend beyond 6 years where initial findings reveal irregularities or existence of fraud. 7.3.0 Types of GST Audits Type Nature of audits Desk Audit Checking and verification of information on GST Returns Refund Audit Verification of refund claims Transaction Audit Advisory Audit Verification of existence of transactions and that they are correctly compiled and reported Comprehensive review to ensure compliance with GST legislations Cancellation Audit Conducted prior to cancellation of GST registration Special Audit Audit reviews as determined by the Director General Large Tax Payer Unit (LTU) Audit Audits conducted for Taxable Persons classified as a large taxpayer to ensure their compliance with GST legislations SE Lai CK Page 14
8.0.0 ILLUSTRATIONS OF HOW GST WORKS 8.1.0 ILLUSTRATION - STANDARD-RATED (6%) SUPPLIES 8.1.1 The following illustration is based on the GST charges in respect of the manufacture and sale of crockeries, from the raw material (clay) supplier to the final retailer. 8.1.2 Incidental business costs and overheads are ignored for purposes of the illustrations. Monthly Sales price Output Tax Input Tax Net GST Payable/ (Refundable) Taxable Person RM RM RM RM Clay supplier 10,000 600-600 Crockery manufacturer 50,000 3,000 (600) 2,400 Wholesaler 75,000 4,500 (3,000) 1,500 Retailer 82,000 4,920 (4,500) 420 Total GST collected by RMC 4,920 8.1.3 The final consumer, who buys the crockeries is not a Taxable Person, and will not be eligible to claim any refund of the GST paid. SE Lai CK Page 15
8.2.0 ILLUSTRATION - ZERO-RATED SUPPLIES 8.2.1 The following illustration is based on the GST charges in respect of the manufacture and sale of palm cooking oil from the raw material (palm oil) supplier to the final retailer. Palm oil, refined or not, and palm cooking oil (in packing of 20kg or less) are Zero- Rated. Manufacturer also incurs rental of RM10,000 per month on which GST of RM600 is charged. 8.2.2 Other incidental business costs and overheads are ignored for purposes of the illustrations. Taxable Person Monthly Sales price Output Tax Input Tax Net GST Payable/ (Refundable) RM RM RM RM Palm oil refiner 100,000 - - - Landlord Rental 10,000 600-600 Total Taxable Supplies to Cooking oil manufacturer 110,000 600-600 Cooking oil manufacturer 300,000 - (600) (600) Wholesaler 400,000 - - - Retailer 450,000 - - - Net GST collected by RMC - 8.2.3 As palm cooking oil is Zero-Rated, no GST incurred by the final consumer. SE Lai CK Page 16
8.3.0 ILLUSTRATION - EXEMPT SUPPLIES 8.3.1 A supplier of Exempt Supplies cannot charge GST, and therefore cannot claim any GST refunds on Input Tax. 8.3.2 The following illustration is in respect of a private dental practice. Dental services is an Exempt Supply, and the dentist is not a Taxable Person. The dental practice incurs GST on rental and purchases of stationery supplies. 8.3.3 Other incidental business costs and overheads are ignored for purposes of the illustrations. Taxable Person Business owner (Non-Taxable person) Monthly Sales price Output Tax Input Tax Net GST Payable/ (Refundable) RM RM RM RM Landlord - Rental 10,000 600-600 Stationery supplies 2,000 120-120 Total Taxable Supplies to Dental Practice 12,000 720-720 Dental Practice 50,000 - (720) Refund not claimable Net GST collected by RMC 720 SE Lai CK Page 17
9.0.0 TRANSITIONAL RULES FROM SALES/SERVICE TAX TO GST 9.1.0 GENERAL RULE 9.1.1 GST On or after 1 April 2015 Payable on supplies of goods and services 9.1.2 Sales Tax and Service Tax - wef 1 April 2015 (c) Cease to be chargeable. Existing Sales Tax and Service Tax licensees cease to be registered. Licensees with annual taxable turnover of > RM500,000 will be mandatorily required to be registered under GST. 9.2.0 SALES TAX 9.2.1 Where a Sales Tax licensee is not a GST Registered Person on 1 April 2015 (eg. His annual taxable turnover is < RM500,000): He is required to account and pay Sales Tax on the following held on 1 April 2015: Materials/Goods held Sales Tax Act 1972 (where applicable) Raw materials/components acquired free from Sales Tax Section 9 Raw materials/components on which deduction of Sales Tax has been claimed under the Credit System Section 31A Goods exempted from Sales Tax Section 10 Finished and semi-finished goods N/A (c) He is required to account for Sales Tax on goods he had: Supplied before 1 April 2015. Where the invoice is issued or payment is received on or after 1 April 2015. Sales Tax Return (CJP1) for the last taxable period to be furnished to the RMC not later than 28 days after 1 April 2015. 9.2.2 Where a Sales Tax licensee becomes a GST Registered Person on 1 April 2015: There will be NO liability to account for Sales Tax on such goods when CJP1 is submitted for the last taxable period (under Sales Tax). SE Lai CK Page 18
9.3.0 SERVICE TAX 9.3.1 A Service Tax licensee, irrespective of whether he becomes a GST Registered Person or not, is required to furnish his Service Tax Return (CJP1) for the last taxable period for the following: Amount of service tax not received from clients for taxable services provided and have remained unpaid: Exceeding 12 months from the date of invoice. 12 months and less from the date of invoice. Amount of service tax on all taxable services provided: In the last taxable period. Before 1 April 2015 where the invoice issued or payment received on or after 1 April 2015. 9.3.2 Service Tax Return (CJP1) for the last taxable period to be furnished to the RMC not later than 28 days after 1 April 2015 (or such longer period subject to approval of DG), and amount of Service Tax payable shall be paid in accordance with S14 Service Tax Act, 1975. 9.4.0 BAD DEBT RELIEF Bad debt reliefs available under Sales Tax and Service Tax will apply irrespective whether or not the licensee becomes a GST Registered Person. 9.5.0 OTHER TRANSITIONAL PROVISIONS The GST Guideline on Transitional Rules also covers transitional provisions for the following: Taxable Goods sold before 1 April 2015 and returned on or after 1 April 2015. (c) (d) (e) (f) (g) Taxable Services provided before 1 April 2015 and terminated on or after 1 April 2015. Progressive and periodic supply spanning GST implementation. Supply of Taxable Goods or Taxable Services made before 1 April 2015 and payment received or invoice issued on or after 1 April 2015. Supply of goods or services NOT subject to Sales and Service taxes. Special refund for goods held on hand. Rights granted for life. (h) Construction agreements made before 1 April 2015. (i) (j) (k) Warranties. Retention payments. Unredeemed vouchers. SE Lai CK Page 19
10.0.0 SPECIAL RULES Transaction E-Commerce [GST Guide on E-Commerce] Vouchers/Tokens/Stamps [GST Guide on Retailing] Employee Benefits [GST Guide on Employee Benefits] Societies and similar organisations [GST Guide on Societies and Similar Organisations (including Charitable Entities)] Charitable Entities [GST Guide on Societies and Similar Organisations (including Charitable Entities)] Repossessed Goods [GST Guide on Repossession] 2 nd Hand Goods Scheme [GST Guide on 2 nd Hand Goods] Treatment Supplies Treated in same manner as conventional transactions Services GST chargeable if both supplier and recipient belong in Malaysia Monetary GST chargeable when vouchers are redeemed Non-monetary GST chargeable when vouchers are issued Employee Benefits stated in Employment Contract o Eg. Interest-free loans, leave passage, accommodation, transport, goods given free-of-charge o Such Employee Benefits are not subject to GST o Input Tax incurred is claimable. Goods given free-of-charge NOT stated in Employment Contract o Treated as Supply by employer is GST chargeable o Exceptions: Supply is Zero-Rated; Input Tax on Supply is not allowed as credit; or Cost of Supply to the Employee is RM500 or less p.a. Services provided free-of-charge o NOT subject to GST Not subject to GST if: Supply to members is related to its aims and objectives, is available without payment other than membership subscription, and value of supply is nominal; or Supply to donor or sponsor has no commercial value Charities required to be registered and charge GST if: o They are involved in business activities; and o Their Taxable Supplies exceed RM500K Selected charitable entities may be given tax relief to acquire goods or services for charitable purposes GST chargeable on sale of repossessed goods where the owner (Hirer) is a Registered Person GST chargeable by repossession agent on services if he is a Registered Person Under normal rules, GST chargeable on full value of supply whether goods are new or used. For prescribed 2 nd -hand goods (eg. used motor vehicles), GST is charged on the Excess as determined below: o Excess = Sale price less Purchase price Prior approval from RMC required SE Lai CK Page 20
10.0.0 SPECIAL RULES (CONT D) Transaction Transfer of Business as a Going Concern (TOGC) [GST Guide on TOGC and Capital Goods Adjustment] Capital Goods [GST Guide on Capital Goods Adjustment] Auctioneers [GST Guide on Auctioneers] Agents [GST Guide on Agent] Treatment Facility provided for both transferor and transferee to alleviate cash flows GST is not chargeable on TOGC Exceptions: o Sale of assets (eg. land and building) which is not capable of operating as a business on its own o Transfer of shares in a limited company Conditions: o Transferor is a GST Registered Person at the time of transfer o Transferee is a Taxable Person or by virtue of the transfer, becomes a Taxable Person o Business transferred is a going concern at time of transfer o Transferee must use transferred assets to carry same kind of business o Where part of business is transferred, it must be capable of operating on its own Include all goods that can be capitalized under generally accepted accounting principles as their business asset and used by a person in the course or furtherance of a business If goods are used wholly to make a Taxable Supply, the amount of Input Tax can be claimed in full except on blocked inputs Amount of Input Tax that can be claimed is adjusted during the period of its use Period of adjustment o 10 years for land and building o 5 years for any capital item other than land and building Auctioneer acting as agent o Principal (owner of goods) to account for GST on sale o Auctioneer to account for GST on commission/fee Auctioneer acting in own name without disclosing Principal o GST chargeable on sale by auctioneer o Supply of goods made by the Principal to the Auctioneer is disregarded GST chargeable on services Agent provide to Principal (where Agent is a Registered Person) Principal liable to GST on supply Agent acting on behalf of non-malaysian Principal Agent liable for GST on behalf of the Principal Agent acting in own name will be treated as a normal Taxable Person SE Lai CK Page 21
10.0.0 SPECIAL RULES (CONT D) Transaction Treatment Capital Markets [GST Guide on Capital Markets] The following treated as a single entity for GST Registration: o Dealer (Lead Member) and dealer representatives; or o Futures broker (Lead Member) and future brokers representatives Supplies treated as supply by/to the Lead Member Intra-supplies between the Lead Member and the representatives are disregarded for GST purposes Designated Area (DA) Refers to the free ports of Langkawi, Labuan and Tioman. GST treatment on the supply of goods and services in the DA: Supplies within DA and between DA are disregarded for GST purposes. Goods supplied o DA to Malaysia o Malaysia to DA Subject to GST (treated as import). Zero-rated except otherwise prescribed by the Minister. Supply of services o DA to Malaysia } Standard-rated o Malaysia to DA } Importation of goods or supply of imported services into DA o No GST chargeable except otherwise prescribed by the Minister Disbursements GST treatment depends on whether such expenses are acquired by the Registered Person as a Principal or Agent Recovery of expense a Registered Person have incurred in the course of business o Registered Person acting as Principal o Expense treated as a reimbursement o Such reimbursement is a separate Supply and is subject to GST Recovery of payment a Registered Person have incurred on behalf of another party o Registered Person acting as Agent o Expense treated as disbursement o Such disbursement is not subject to GST o The other party may claim Input Tax on the disbursement SE Lai CK Page 22
11.0.0 SPECIAL SCHEMES Special Schemes Approved Trader Scheme [GST Guide on Approved Trader Scheme] Approved Toll Manufacturer Scheme [GST Guide on Approved Toll Manufacturer Scheme] Approved Jeweller Scheme [GST Guide on Approved Jeweller Scheme] Warehousing Scheme [GST Guide on Warehousing Scheme] Flat Rate Scheme [GST Guide on Flat Rate Scheme] Treatment Allows any Taxable Person to suspend GST payment on goods imported at the time of importation Conditions: o Licensed under S65A Customs Act, 1967 o Operating in a FTZ under S10(1) FTZ Act, 1990 o Operate a MIDA approved International Procurement Center (IPC) or Regional Distribution Center (RDC) o Have annual sales turnover > RM25m of which at least 80% are zero-rated supplies o Approved Toll Manufacturer under S73 GST Act; or o As determined by Minister Allows approved Taxable Person (Toll Manufacturer) to disregard any value added activity (contract services) on goods belonging to an overseas principal Includes treatment or processing or goods Principal conditions: o Value of overseas supplies > RM2m p.a. o Toll manufacturer exports at least 80% of the finished goods Alleviates GST liability of jewellery manufacturers on precious metals Prescribed precious metals: o Gold (99.5% purity) ; Silver (99.9% purity) ; Platinum (99.9% purity) Principal mechanism of scheme: o GST on supply of prescribed previous metals is the liability of the manufacturer, not the supplier o Manufacturer account for GST payment by Recipient-Self- Accounting GST on input need not be paid upfront, only upon sale with net-off against output tax. GST suspended on all goods imported and deposited into a warehouse Warehouse include (under S2 Customs Act, 1967): o Customs warehouse o Licensed warehouse o Duty-free shops o Inland clearance depot Allows any person not liable to be registered to recover the embedded GST on his purchases if he is involved in prescribed activities (crop production, livestock and fishery) Conditions: o May charge a flat rate addition on the Taxable Supply made to any registered person; and o Shall not claim any input tax incurred on his purchases SE Lai CK Page 23
11.0.0 SPECIAL SCHEMES (CONT D) Special Schemes Tourist Refund Scheme (TRS) Treatment Allows tourists to claim GST paid on goods purchased Available for air travellers only Conditions o Foreign tourist (neither a citizen nor a permanent resident of Malaysia) o Not a member of the cabin or flight crew of the aircraft leaving Malaysia. o Students entering or staying in Malaysia on a student pass - goods are taken out of Malaysia within 3 months from the date of purchase o Foreign diplomats departing from Malaysia permanently - the goods are taken out of Malaysia within 3 months from the date of purchase or completion of service. All qualifying goods for which GST has been paid except for: o Wine, spirits, beer and malt liquor. o Tobacco and tobacco product. o Jewellery, precious metal and gems stone. o Goods consumed in Malaysia wholly or partially. Criteria Qualifying goods o Goods are purchased at the approved TRS outlets. o Valid tax invoice issued by the TRS outlets. o Minimum RM300 spent at any TRS outlet. o Depart with the goods through any international airport within 3 months from the date of purchase. SE Lai CK Page 24
ANNEXURE A. GST GENERAL/SPECIFIC GUIDELINES (AS AT 21 FEB 2014) S/N GST General/Specific Guidelines Version G1 General Guide 27 Oct 2013 S1 Capital Goods Adjustment 15 Nov 2013 S2 Designated Areas 11 Nov 2013 S3 Employee Benefits 16 Aug 2013 S4 Export 4 Nov 2013 S5 Free Commercial Zone 6 Nov 2013 S6 Import 4 Nov 2013 S7 Inland Clearance Depot 11 Nov 2013 S8 Input Tax Credit 27 Oct 2013 S9 Partial Exemption 4 Nov 2013 S10 Registration 20 Jan 2014 S11 Supply 25 Oct 2013 S12 Tax Invoice & Record Keeping 28 Oct 2013 S13 Transfer of Going Concern 27 Oct 2013 S14 Transitional Rules 28 Oct 2013 SE Lai CK Annexure A
ANNEXURE B. GST INDUSTRY GUIDELINES (AS AT 21 FEB 2014) GST Industry Guidelines Version Advertising Services 28 Jan 2014 Agent 22 Jul 2013 Airline Industry 31 Jul 2013 Approved Jeweller Scheme 26 Oct 2013 Approved Toll Manufacturer Scheme 27 Oct 2013 Approved Trader Scheme 26 Jul 2013 Auctioneer 18 Jul 2013 Commercial Banking 19 Nov 2013 Construction Industry 18 Nov 2013 Development Financial Institution 30 Jan 2014 Direct Selling 27 Nov 2013 Duty Free Shop 27 Oct 2013 Freight Transportation 10 May 2013 Fund Management 27 Oct 2013 Free Industrial Zone & LMW 5 Jan 2014 Hire Purchase and Credit Sale 17 Dec 2013 Insurance and Takaful 31 Dec 2013 Islamic Banking 1 Nov 2013 Leasing 28 Oct 2013 Manufacturing 1 Jan 2014 Money Lending 19 May 2013 Passenger Transportation 6 Jun 2013 Pawn Broking 28 Nov 2013 Professional Services 7 Feb 2014 Petroleum Downstream 31 Jul 2013 Petroleum Upstream 25 Oct 2013 Postal and Courier Services 31 Oct 2013 Property Developer 7 Jan 2014 SE Lai CK Annexure B
ANNEXURE B. GST INDUSTRY GUIDELINES (AS AT 21 FEB 2014) (CONT D) GST Industry Guidelines Version Relief on Second-Hand Goods 11 Nov 2013 Repossession 6 Nov 2013 Retailing 30 Dec 2013 Share Issuing House & Share Registrar 10 Jan 2014 Trustee Services 15 May 2013 Venture Capital 25 Oct 2013 Warehousing Scheme 27 Oct 2013 SE Lai CK Annexure B