GST ON HEALTHCARE SERVICES

GST ON HEALTHCARE SERVICES SUPPIAH A/L AYAHOO SENIOR ASSSITANT DIRECTOR OF CUSTOMS II GST DIVISION Date: 5 NOVEMBER 2014 PEJABAT PELAKSANAAN GST KEMENTERIAN KEWANGAN

Agenda: Introduction Mechanism of GST Exempt healthcare services Standard rated services by healthcare facility Other services related to healthcare facility Types of supply and acquisition by healthcare facility Apportionment Rules Other Services 2

Current Treatment Sales Tax 1972 & Service Tax 1975 ITEM GOVERNMENT PRIVATE Acquisition Goods Not subject to sales tax Only selected goods are not subject to sales tax Services Subject to services tax Subject to services tax Services provided Not subject to services tax Subject to services tax on food and lodging provided by the hospital 3

Introduction How service tax works Service Provider Govt collects tax when service is provided to consumer Patient 4

5 GST Treatment on Healthcare Services Sales Tax & Service Tax (SST) Goods and Services Tax (GST) Rate = 6 % Threshold = RM500,000 Once GST implement 1 st April 2015, Sales Tax Act And Service Tax Act will be repealed.

Basic principles of GST TYPES OF SUPPLY OUTPUT TAX INPUT TAX Standard rated 6% Claimable Zero rated 0% Claimable Exempt No GST charged Non claimable 6

Basic principles of GST Criteria to claim Input Tax Minus (-) GST charged on taxable supplies GST paid on business purchases Net GST Less Equals Output Tax Input Tax Plus (+) Refund to taxable person Pay GST to Government 7

Supply by Healthcare Services Facility GST Treatment Government Out of scope Private Exempt 8

HOW GST WORKS - EXEMPT GST 6 % NO GST Hospital Supplier Private Hospital Patient Supplier claims tax paid on input Private hospital cannot claim tax paid on input Patient does not pay any GST 9

HOW GST WORKS? - EXEMPT Delivery / supply chain Hospital Supplier Private Hospital Patient Purchase cost : RM100 GST* : RM6 Purchase price : RM106 *Note: cannot claim input tax Value-Adding Activity Added Value : RM25 Selling price : RM131 GST : RM0 Total selling price :RM131.00 10

Comparison with other country CANADA UK AUSTRALIA SINGAPORE/ NEW ZEALAND/ SOUTH AFRICA INDONESIA GST / VAT 5 20 10 7 / 15 / 14 10 Healthcare services Exempted - input tax recovery, the rebate rate is fixed at a) provided by a qualifying institution e.g. Drugs, medicines, bandages, plasters or ointments in the course of care or treatment are exempt Zero rated -full recovery of input tax supply except cosmetic Standard rated Exempted 83% b) not a qualifying institution, drugs or medicines that you surgery or procedures supply standard rated which not to alleviate a - hospital beds on a zero rated c) HMRC allow pharmacists (including those operating from an independent pharmacy within hospital premises) to zero rate drugs, medicines and other qualifying goods medical condition where ALL of the conditions are met Medicine SR SR SR SR SR Dietary supplements SR SR SR SR SR TCM SR SR SR SR Exempted 11

Healthcare and Related Services : Private Hospitals - Exempt Private Clinics - Exempt Pharmacy Standard rate Veterinary Standard rate Traditional and complementary medical services (T/CM) Standard rate GOVERNMENT out of scope 12

Exempt Healthcare Services 13

Healthcare services are treated as exempt supplies under GST if they are supplied by the private healthcare facility registered or licensed premise under the Private Healthcare Facilities and Services Act 1998. [Act 586]. 14

3 main aspect : Healthcare services Include ambulance food, lodging and mortuary services Professional healthcare services Facility healthcare services 15

Healthcare services GST Treatment on Healthcare Services medical, dental, nursing, midwifery, allied health, pharmacy and ambulance services accommodation for purpose of providing healthcare services screening, diagnosis or treatment of person preventive or promoting health Services provided by healthcare para professional curing or alleviating any abnormal condition Include food and mortuary services 16

Healthcare facility Any premise used or intended to be used for the provision of healthcare services or health related services, such as private hospital, hospice, ambulatory care centre, nursing home, maternity home, psychiatric hospital, psychiatric nursing home, community mental health centre, hemodialysis centre, medical clinic, dental clinic or such other healthcare or health related premises as the Minister of health may from time to time, by notification in the Gazette 17

Healthcare professional GST Treatment on Healthcare Services any medical practitioner, dental practitioner, pharmacist, clinical psychologist, nurse, midwife, medical assistant, physiotherapist, occupational therapist and other allied healthcare professional and any other person involved in the giving of medical, health, dental, pharmaceutical services under the jurisdiction of the Ministry of Health must be a person who is registered as such under the regulatory body of relevant professional, dental, nursing or midwifery profession of medicine or any other regulatory body and who holds a valid practicing certificate 18

Healthcare services For the purpose of this treatment, services of the healthcare professional which are not under the employment of the private healthcare facilities shall be treated as outsourcing services and will be subject to GST. 19

PROFESSIONAL SERVICES F / H Individual (locum) EX H F / H SR EX SR D1 30% = RM 3,000.00 (Rental, Billing, Nursing, Marketing) SR P2 EX Own Clinic SR Contract for services D2 SR 70% = RM 7,000.00 (Consultancy Fee) RM 10,000.00 EX P1 SR P3 EX Company + Clinic SR F / H EX SR Individual + Company H HOSPITAL D DOCTOR F/H FACTORY / HOUSE 20

Healthcare services exempt if Provided by licensed private healthcare facility eg. : All healthcare services provided in Hospital A provided by licensed private healthcare facility to another licensed private healthcare facility eg. : - mortuary services from Hospital A to Hospital B - supply of blood test/ x-ray services by Hospital X to Ahmad Clinic 21

Healthcare services exempt if provided by doctor of the licensed private healthcare facility to a person at home eg. : Dr Ahmad from Clinic A make a house call to his patient s home due to his disability to move 22

Healthcare services exempt if provided by provider in licensed private healthcare facility acting as panel clinic to a company eg. : Siva Clinic acts as a panel clinic for Syarikat Maju Jaya and provides healthcare services to Syarikat Maju Jaya s staff at Syarikat Maju Jaya s premise. 23

Ancillary Healthcare services exempted includes: Prescription of medicine, food, lodging and mortuary services by a licensed private healthcare facility medical reports 24

Exempt Services by Healthcare Facility Examination Imaging Consultancy service Medicine Accommodation / Room Food Ambulance Exempt / Not subject to GST Input tax not claimable 25

Standard Rated Services By Healthcare Facility 26

Standard Rated Supplies GST Treatment on Healthcare Services Healthcare services provided by healthcare professionals in a private healthcare facility who are not employees nor under its payroll on basis of contract for service are standard rated supplies. Any services provided by the healthcare professionals to the private healthcare facility is subject to GST at a standard rate. 27

Services not related to healthcare are standard rated : Provision or rental / lease of space, equipment and other facilities Eg. : - Hospital provides operation theatre, medical equipment to doctor not under its employment - Rents out part of building used for office, clinic, shop by third party Parking, laundry Accommodation / room and food provided to other than patient 28

Services not related to healthcare are standard rated : (cont..) Provision of goods used as aids such as. eg : Hospital sells artificial limb, crutches, hearing aid, wheelchair to patient Provision of staff and professional expertise Provision of seminar and expertise for training Provision of facilities for fitness and well being eg : GST Treatment on Healthcare Services gymnasium, spa, slimming center 29

Other Services by Healthcare Facility Provide facilities and equipment Rental Seminar Training Parking Laundry Canteen Hygienic cleaning Subject to GST - Standard rated supply Can claim input tax on inputs relating to such supplies 30

Other Services Related to Healthcare Services 31

Other Related Activities to Health Sector Spectacle shop Test lab Veterinary services Alternative medicines (T/CM) Standard rated supply Subject to GST Input tax claimable 32

Other Related Activities to Health Sector( cont..) Gymnasium Spa Sauna Slimming centre Massage parlor Beauty saloon Standard rated supply Subject to GST Input tax claimable 33

Types of Supply and Acquisition by Healthcare Facility 34

Exempt supply Supply by private healthcare services :- Example of exempt supplies Treatment and consultancy services Supply of food, accommodation and prescript medicine Ambulance services The total charge is GST exempt Even your annual exempt supply exceed RM500,000 you are still not liable to register under GST 35

Standard rated supply Supply by private healthcare services :- Example of standard rated supplies Provision of space, facilities and equipment Supply of food, accommodation to other than patient Parking, laundry services The charge are subject to GST If your annual taxable supply exceed RM500,000, you are liable to register under GST 36

Mixed supply Supply by private healthcare services :- Example of mixed supplies Provision of healthcare services to patient Provision of food and accommodation to other than patient Parking, laundry services Some charges taxable supplies, some are exempt supplies Need to list out and do apportion 37

Acquisition of goods and services Any acquisition of goods or services by healthcare facility For making taxable supply - can claim For making exempt supply cannot claim For making exempt and taxable supply - apportion 38

Acquisition by Healthcare Facility Acquisition Equipment GST Treatment Standard rated Medicine Standard rated Services Standard rated Equipment : certain machinery for healthcare treatment may entitled for GST (Relief) Order 2014 Medicine : certain medicine for healthcare treatment may entitled for GST (Zero Rate Supply) Order 2014 39

Outsourcing Services to Healthcare Facility Laboratory Hygienic cleaning Imaging ** Maintenance ** Food preparing **Security services *** Parking *** Laundry Subject to GST Input tax not claimable if such services used for exempt **Apportion if such services used for mixed supply ***Claim in full if used for taxable supply 40

Apportionment Rules 41

Apportionment Rules Inputs used Wholly attributable to taxable supplies Wholly attributable to exempt supplies Claim 100% input tax Attributable to both taxable and exempt supplies Cannot claim input tax Apportionment rules apply 39

Apportionment Rules Input tax directly attributable to taxable supply can be claimed in full Input tax directly attributable to exempt supply cannot be claimed Input tax attributable to both taxable and exempt supply (residual input) need to be apportioned Std method - Known as TURNOVER METHOD Taxable Supplies x 100 R (recoverable %) = Taxable Supplies + Exempt Supplies ITC = R x GST incurred on residual input 43

Apportionment Rules Attribution/Apportionment E.g. Taxable supplies = RM 250,000 Input tax attributable to taxable supplies = RM30,000 Exempt supplies = RM 50,000 Input tax attributable to exempt supplies = RM6,000 Residual input tax = RM 15,000 R (recoverable %) = 250,000 250,000 + 50,000 x 100 = 83.33% Claimable ITC on residual = 83.33% x 15,000 = RM12, 499.50 Therefore, total claimable ITC = RM30,000 + RM12,499.50 = RM 42,499.50 44

Other Related Services 45

Pharmacy Services Type Industrial Pharmacy Hospital Pharmacy Retail Pharmacy GST Treatment Standard rate Government GST out of scope Private exempt Standard rate 46

Veterinary Services Veterinary hospitals Clinics Veterinary pharmacy Animal hotels Other related services Standard rated supply Subject to GST Input tax claimable 47

Traditional & Complementary Medicine Services (T/CM) Acupuncture Reflexology Naturopathy Massage Reflexology Homeopathy Ayurveda Aromatherapy Chinese Medicine Standard rated supply Subject to GST Input tax claimable 48

Thank you BAHAGIAN GST JABATAN KASTAM DIRAJA MALAYSIA

Enquiry 53

Enquiry i) Ibu Pejabat Kastam Diraja Malaysia Bahagian GST, Aras 3 & 4, Blok A, Menara Tulus, No. 22, Persiaran Perdana, Presint 3, 62100 PUTRAJAYA. ii) GST PORTAL http://www.gst@customs.gov.my iii) Customs Call Centre (CCC) Tel: 03-78067200 Fax: 03-78067599 Email: ccc@customs.gov.my 51