A GST FOR MALAYSIA
WHAT YOU NEED TO KNOW
CPA Australia
Last updated – January 2015
THE STORY SO FAR...
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The Malaysian Goods and Services Tax commences on 1 April 2015.
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GST rate is 6 per cent on taxable supplies.
WHAT IS A GST?
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A GST is a multi-stage tax collected at all stages of production.
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Ultimately borne by the consumer.
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Overcomes cascading along the supply chain.
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But it creates churn, because of its multi-staged nature.
FEATURES OF MALAYSIA’S PROPOSED GST
The GST will apply to most goods and services:
‘GST is charged on:(a) any taxable supply of goods and services;
(b) made in the course or furtherance of any business;
(c) by a taxable person;
(d) in Malaysia.’ Refer to the Royal Malaysian Customs Department's GST General Guide
(PDF)
ROYAL MALAYSIAN CUSTOMS DEPARTMENT
GUIDES, AND THE BILL
NEW TERMS, CONCEPTS AND DEFINITIONS
As a result of the GST, new terms will be introduced to your taxation
vocabulary. For example:
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Business
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Supply – all forms of supply where goods and services are given in return for a
consideration
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Standard-rated (taxable) – subject to GST at the relevant standard rate
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Zero-rated – not subject to GST, and supplier entitled to claim input tax credits
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Exempt – not subject to GST directly, but input taxed, and
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Out of scope – not subject to GST
GST IS ALSO CHARGED ON…
• The importation of goods and services into Malaysia.
• All imported goods – except goods prescribed as zero rated and
exempt – will be subject to GST.
• All imported services acquired for the purpose of business, except
exempt supplies of services will be subject to GST.
WHAT ARE ZERO RATED SUPPLIES?
• There is no GST on zero rated items, and
• The supplier can claim back their input tax credits
Examples:
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agricultural products, such as padi and fresh vegetables
foodstuffs such as rice, sugar, table salt, plain flour and cooking oil
livestock supplies such as live animals, fresh or frozen meat of cattle and swine
live and unprocessed poultry, fresh and frozen meat of chicken and duck
fresh and salted eggs and fish
the supply of the first 200 units of electricity to domestic users
the supply of the first 35 cubic metres of water to domestic users, and
exported goods.
Refer to the GST Order for zero rated supplies (PDF)
WHAT ARE EXEMPT SUPPLIES?
Exempt supplies: the supplier pays GST on business inputs, they
cannot claim it back, and they do not charge GST to the final
consumer.
Examples include services provided by:
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child-care organisations
educational organisations
financial institutions
funeral service burial and cremation
health-care organisations
highways and toll bridges
public transport providers
supplies made by associations and similar organisations, and residential real
estate
Refer to the GST Order for exempt supplies (PDF)
WHO MUST REGISTER?
A person is required to be registered for GST if he makes taxable
supplies where the annual taxable turnover exceeds RM500,000.
Taxable turnover means the total value of taxable supplies excluding
the amount of GST.
Excludes:
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capital assets disposed;
imported services; and
disregarded supplies made in relation to Warehousing Scheme, or
disregarded supplies made within or between designated areas.
VOLUNTARY REGISTRATION
A person can apply for voluntary registration even though the value
of their taxable supplies does not exceed the prescribed threshold
(RM500,000) if:
1. The person intends to make any taxable supplies, and
2. provided they can satisfy the Director General that they are
committed to doing business by submitting the following
documents:
(a) details of business arrangements (business plans, plants, location)
(b) copies of contract for establishment of premises such as rental of
premises construction of pipelines or purchase of equipment
(c) details of any patents
(d) details of business purchases; or
(e) other documentary evidence
WHAT IS A TAXABLE SUPPLY?
Taxable supply:
The definition of supply covers all forms of supply where goods and
services are given in return for a consideration.
There is also a deeming rule for circumstances where no
consideration is given
WHAT IS A TAXABLE PERSON?
Taxable person:
1. includes an individual, sole proprietor, partnership, corporation,
Federal Government, State Government, statutory body, local or
public authority, society, club, trade union, co-operative, trustee
and any other body, organization, association or group of persons
whether corporate or unincorporated
2. a person who is or is required to be registered under the GST Act
3. a person who makes taxable supplies in Malaysia and whose
annual turnover exceeds the proposed threshold of RM500,000
Such person is required to be registered under the GST Act
A voluntary registrant is also a taxable person
WHAT IS A BUSINESS?
A business includes any trade, commerce, profession, vocation or
any other similar activity whether or not for pecuniary profit.
The RMCD General Guide states that following criteria may be used
to determine whether an activity qualified as a business for GST
purposes:
(a) It is a serious undertaking or work earnestly pursued
(b) It is pursued with reasonable or recognisable continuity
(c) It is conducted in a regular manner and on sound and recognised
business principles (business-like nature)
(d) It is predominantly concerned with making supplies for a
consideration; or
(e) It is making supplies of a kind commonly made by commercial
organisations.
RMCD SIMPLIFIED TAX INVOICE EXAMPLE
Source: General Guide, p41.
GST FEATURES cont’d
Some examples of zero rated items:
• rice
• sugar
• cooking oil
• flour
• fish, beef, chicken
• vegetables
Some examples of exempt items:
• Certain services provided by financial institutions, educational and
health-care organisations and providers of public transport, as well
as residential real estate.
RMCD INDUSTRY GUIDES
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Agent (revised as at 22 July 2013)
Airline Industry
Approved Jeweler Scheme (revised as at 26 October 2013)
Approved Toll Manufacturer Scheme (revised as at 27 October 2013)
Approved Trader Scheme (revised as at 26 July 2013)
Auctioneer (revised as at 18 July 2013)
Commercial Banking
Construction Industry
Duty Free Shop (revised as at 27 October 2013)
Freight Transportation
Fund Management (revised as at 27 October 2013)
Free Industrial Zone and Licensed Manufacturing Warehouse
Hire Purchase and Credit Sale (revised as at 17 December 2013)
Insurance and Takaful (revised as at 31 December 2013)
Leasing (revised as at 2 December 2013)
Manufacturing (revised as at 1 January 2014)
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Money Lending
Passenger Transportation
Pawn Broking
Petroleum Downstream
Petroleum Upstream (revised as at 16 December 2013)
Postal and Courier Services
Property Developer
Relief for Second-Hand Goods (Margin Scheme) (revised as at 11
November 2013)
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Repossession
Retailing
Venture Capital (revised as at 25 October 2013)
Warehousing Scheme (revised as at 27 October 2013)
NEXT STEPS
Businesses need to get busy preparing for registration and the
commencement date.
The GST is a whole-of-business issue, and not something solely the
domain of your tax experts.
Some examples of key issues to consider in preparing for a GST:
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Registration
Pricing
Contracts spanning the implementation of the GST
Accounting systems
Refer to CPA Australia Malaysia’s GST factsheets:
cpaaustralia.com.au/gst
CPA AUSTRALIA AND MALAYSIA’S GST
Training sessions
Fact sheets
FURTHER INFORMATION
Royal Malaysian Customs Department
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Website
GST General Guide (PDF)
Goods and Services Tax Act 2014
CPA Australia Malaysia’s GST factsheets
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cpaaustralia.com.au/gst