GST TREATMENT ON
MANUFACTURING AND RETAIL
SECTOR
Venue : KLSFEA Shah Alam
Date : 26 February 2014
Organised by:
KLSFEA
Presenter: Sabariah Md Yusof
ROYAL MALAYSIAN
CUSTOMS
FIZ & LMW Concept
Current treatments
GST Treatments
 Under Customs and Sales Tax
legislation, FIZs and LMWs are
deemed to be a placed outside
Malaysia
 For GST, it is treated as a place
located in Malaysia.
 Local sales made by FIZs and
 For GST, is considered as local
LMWs are as if importation into
supplies and subject to normal
Malaysia
rules.
 For documentary control, LMWs  For GST, FIZs and LMWs who
are required to submit monthly
are approved under the special
records but not for FIZs.
schemes (ATS/ATMS) are
required to submit certain
records.
2
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 is suspended on importations
of raw materials and machineries
directly/indirectly used for
manufacturing .
 GST on importations of goods or
locally acquisitions in the course or
furtherance of businesses are
subject to GST. GST on inputs are
claimable.
 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
3
1
4
Approved Trader Scheme (ATS)
•
a facility to relieve GST payment on importation of goods
•
Under ATS
 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 in the month which the importation takes place
Proposed amendment 2013:
 “Sec.72(2) Any taxable person granted an approval under the
Approved Trader Scheme shall declare the suspended payment
of tax in the return for the taxable period to which the
suspension relates”
5
5
Approved Trader Scheme
Malaysia
AA Pte Ltd
ATS approval
XX Sdn Bhd
GST-03 (November
20XX)
Total value of goods
imported under ATS
= RM106,000
Total value of GST
suspended= RM6000
Port (November 20XX)
Value of imported
Goods (CIF + Duty
Import )= RM106000
GST 6%= RM6000
overseas
Customs no.1
GST is
suspended
Goods cannot be suspended under ATS
•Liquor, beer, wine and spirits
•Tobacco and tobacco products
•Blocked input tax goods
•Goods for personal/non- business
6
ATS
Persons eligible for ATS
•
•
•
•
•
•
•
Companies located within Free Industrial Zone (FIZ)
Licence 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
7
7
LMW COMPANIES
SEC.65/65A CUSTOMS ACT 1967 –IMPORT/EXPORT/LOCAL SALES
PROCEDURES
INPUT
OUTPUT
- Raw materials / components
- Machines / equipments
EXPORT
DA
FCZ (outright
export)
IMPORT
•
EXEMPTION;
• Import Duty
• Excise Duty
GST on importations (6%)
 suspended under
ATS
LMW Company
GST REGISTRANT /
ATS
Local Supplier
FIZ
LMW
Others
Subject to GST;
• Standard rate
Zero Rated
GPB / FIZ
/FCZ
Subject to GST
• Standard rate
LOCAL SALES
GST incurred for making taxable supplies
-Claimable
Subject to
- Import duty
- GST at standard rate
ATS
Approval subject to the following criteria:
•
•
•
•
•
•
•
•
•
Must be registered under Sec. 20 of the GST Act 20XX
Participant must make wholly taxable supply
Must be a registered user of electronic service
Must submit monthly GST return
Must makes 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
9
Approved Toll Manufacturer Scheme
Purpose
• a facility to overcome the GST embedded when a person buys goods
from an overseas person via a local toll manufacturer
Sec. 73 (2) – Approved Toll Manufacturer Scheme (proposed amendment
2013)
 Any taxable person (Toll Manufacturer) are allowed to disregard
the supply of services which comprises the treatment or
processing of goods 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
10
Approved Toll Manufacturer Scheme (ATMS)
Overseas
Principal
3.
Overseas principal
invoices local customer
on finished goods
received
1.
TM imports
consigned goods
from the overseas
principal (ATS)
4.
TM invoices overseas
principal for valueadded services
-disregarded
Malaysia
Toll Manufacturer
Local Customer
Recipient accounting
2.
TM drop-ships finished
goods to local customer
of overseas principal
Local supplier deliver
goods on behalf of OP (ZR)
Local supplier
11
ATMS
Eligibility for approved under the ATMS
 Any toll manufacturer who has contract(s) with overseas principal
who is not belong in Malaysia e.g 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 are allowed under ATS?
 related to manufacturing, treatment, processing, finishing, assembling
and other manufacturing-related works on consigned goods
12
ATMS
GST tax treatment for ATMS
• Supply of services by toll manufacturer (TM) to overseas principal
(processing charges/toll) to be disregarded
• TM deliver the processed goods on behalf of his overseas principal
to the local customer
• Supply of processed goods by overseas principal to his local
customer subject to GST
 Local customer has to account the GST by way of recipient
accounting
 Need to account based on whichever is earlier:
 Invoice received from overseas principal; or
 Payment made to overseas principal
Acquisition of goods by overseas principal
 Local supplies delivered to the toll manufacturer under the account
of overseas principal is zero rate
13
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 2015. The Overseas principal issued an invoice to
local Customer (B) with the amount of RM200,000.00 on 5 May 2015
How to account for the tax?
Local Customer (registered person)
Local customer (not a registered person)
 Needs to account the tax amounting
RM12,000 (6%XRM200,000.00) in his GST
return.
 Needs to account the tax not later than
the last day of the subsequent month
from the month in which the supply is
made
GST Return - May 2015(GST-03)
*GST No.4 - May 2015
OUTPUT TAX =
RM12,000
Value of supply
INPUT TAX
RM12,000
GST amount payable
=
RM200,000.00
RM12,000.00
*Return for non-registrant
14
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
15
Warehousing Scheme
Types of warehouses license under Customs Act 1967:
 Customs warehouse
 Licensed warehouse
 Duty free shops
 Inland clearance depot
Inputs:
Forklift charges,
storage charges
A
B
C
Declares supply
and pays GST
WS - GST Treatment
• 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
17
WS
Example
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, 000.00
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%)
18
WS
*Value of supply
Rate of import duty
Total duty import payable
= RM 10,000.00
= 10%
= RM1000.00 (10%X RM10,000.00)
Daim Sdn Bhd’s customer needs to declare the following amount:
Value for customs purposes
= RM 10,000.00
Import duty (10%)
= RM 1,000.00
Total value for calculating GST
= RM 11,000.00
GST Payable (6% x RM11,000)
= RM
660.00
*
19
Designated Area – Langkawi, Labuan & Tioman
GST Treatment on DA:
Supply
GST Treatment
DA to DA:
Goods and Services
* Not Subject to GST
Within the DA:
Goods and Services
* Not Subject to GST
World to DA:
Goods and Services
* Not Subject to GST
DA to World:
Goods and Services
Zero rated
* Except for petroleum
and other goods as prescribed by the Minister of Finance
20
Designated Area – Langkawi, Labuan & Tioman
Supply
GST Treatment
PCA to DA:
Goods
Services
Zero rated
Standard rated
DA to PCA:
Goods
Standard rated
(as if importation)
* Except for petroleum
and other goods as prescribed by theStandard
Minister ofrated
Finance
Services
21
GST TREATMENT ON MANUFACTURING SECTOR






Farming Out
Drop shipment
Employee benefit
Loan on stock and equipment
Discount
Other transactions
 Gifts
 Samples
 Warranty
 Disposal of assets
 Goods lost/destroyed
22
Farming out within Malaysia
 No transfer of ownership of goods.
it is not a supply of goods
 Sub-contractor to account for GST on value
of services supplied
Finished goods and charged
RM15,000 for labour
XYZ SDN. BHD.
(GST registered
person)
ABC SDN. BHD.
(GST registered
person)
Farmed out
Returned
Raw materials valued at
RM 100,000
23
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)
 Recipient to account GST on the supply of
imported services
Finished goods and charged
RM15,000 for labour
ABC SDN. BHD.
(GST registered
person)
Farmed out
Returned
ALLAN PTE
LTD
Raw materials valued at
RM 100,000
24
Drop Shipment
4.
Non-resident
invoices local
customer on
finished goods
received
Overseas
Non-Resident
1.
Non resident
makes order for
finished goods
from CM Sdn.
Bhd.
2.
CM Sdn.Bhd
invoices
finished goods
supplied to the
non-resident.
Malaysia
Local
Customer
3.
CM Sdn. Bhd. dropship finished goods
to local customer of
non-resident
GST registered
Contract
manufacturer
(CM Sdn.Bhd)
25
Drop Shipment (Contract Manufacturer)
Non-Resident (non-registrant)
 Supply made by contract manufacturer to non-resident is subject to GST
 goods exported is zero rate
 Supply of goods by contract manufacturer (taxable person) to non-resident :
 subject to GST at standard rate
 GST needs to be charged to the non-resident based on transaction
value

Supply of goods (drop-ship) by non-resident to the local customers are not
liable to GST
26
Employee Benefits
Employee benefits include any right, privilege, service or facility
provided free of charge to employees as stated in the contract of
employment
 not subject to GST and input tax is claimable
 If not stated in the contract of employment
 all goods provided free to the employees is subject to GST (subject to
gift rule of RM500) except those exempted, blocked input tax and zero
rated goods
 input tax claimable
 output tax on gifts > RM500
 value to be based on open market value
 Services supplied free
 no GST

27
Loan stock and equipment
Raw materials on loan

it is a supply of goods
 subject to GST
Equipments on loan

it is treated as a supply of services
 subject to GST
28
Discount
GST on the value after discount includes :
 Cash discount
 Prompt payment discount
 Volume discount, etc
 Normally given in percentage or value
 Given when using discount card/coupon at the time of sale or
after sale
 Sales to connected person based on open market value and not
on discounted price

29
Gifts and samples
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
Samples
 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
30
Warranty
 Manufacturer’s warranty normally includes:
 after–sale services and repairs
 any replacement of spare-parts free of
charge during the warranty period
not subject to GST
31
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 (>RM500)
 Sell as scrap
 the value will be the sale value of scrap
 subject to GST
32
2
33
Agenda
•
•
•
•
•
Pricing
Consignment Sales
Trade in Goods
Hire purchase
Credit Sales
34
RETAILING – PRICING
GST charged on standard rated supplies
Assuming the value of goods or services supplied
is RM100.00 and GST chargeable is 6%.
Value
:
RM 100.00
6% GST charged (output tax)
(RM100.00 X 6%)
:
RM
Total (price inclusive of 6% GST) :
6.00
RM 106.00
35
RETAILING – PRICING
GST incurred on standard rated supplies
Assuming the price of goods supplied to the
registered retailer is RM106.00 inclusive of 6%
GST.
Price (inclusive of 6% GST)
:
RM 106.00
The GST incurred (input tax)
(RM106.00 X 6% / 106%).
:
RM6.00
36
RETAILING – PRICING
Registered retailer sales price:
Assuming the GST inclusive price of goods supplied to the
registered retailer is RM106.00 and at the point of sale, the
registered retailer marks up 20% on the cost of goods.
Price of goods (inclusive of GST)
6% GST inclusive (Input tax incurred)
(RM106.00 X 6%/106%)
Actual cost
:
20% Mark-up on Actual cost
:
(RM20% X RM100.00)
Value (cost) at the point of sale :
6% GST Charged
:
Price at the point of sale
:
: RM106.00
: (RM 6.00)
RM100.00
RM 20.00
RM120.00
RM 7.20
RM127.20
37
RETAILING – PRICING
Registered retailer sales price:
Incorrect method
Price of goods (inclusive of GST) :
20% Mark-up on Actual cost
:
(RM20% X RM106.00)
Value (cost) at the point of sale :
RM106.00
RM 21.20
6% GST Charged
Price at the point of sale
RM 7.63
RM134.83
6% Input tax claimed
:
:
RM127.20
: (RM 6.00)
?
38
RETAILING – PRICING
Non-registered retailer sales price:
Assuming the GST inclusive price of goods supplied to the
non-registered retailer is RM106.00 and at the point of sale,
the registered retailer marks up 20% on the cost of goods.
Price of goods (inclusive of GST)
No input tax
Actual cost
:
: RM106.00
: (RM 0.00)
RM106.00
20% Mark-up on Actual cost
(RM20% X RM106.00)
Value (cost) at the point of sale
:
RM 21.20
:
RM127.20
No GST Charged
Price at the point of sale
:
:
RM 0.00
RM127.20
39
RETAILING – CONSIGNMENT GOODS
Consigned Goods
 Goods sent by consignor to a consignee.
 the consignee has possession of goods and will
attempt to sell them, but the consignee does not
own the goods.
40
RETAILING – CONSIGNMENT GOODS
Features of consignment are:
•
The consignor is entitled to receive all the
expenses in connection with consignment.
•
The consignee is not responsible for damage of
goods during transport or any other procedure.
•
Goods are sold at the risk of consignor.
•
The profit or loss belongs to consignor only
41
Examples:
Perfumes
Clothes
Household
accessories
Furnitures
Shoes
Shoes
42
RETAILING – CONSIGNMENT GOODS
GST Treatment on Supplies Made
When consignor has to account for GST?
Time of Supply (TOS)
 when it becomes certain that a supply has
taken place,
(i.e. goods has been sold by consignee)
 Basic TOS : Date of Statement of Sale
 Actual TOS : Date of tax invoice
Provided that the tax invoice was
issued within 21 days from the basic
TOS
43
RETAILING – CONSIGNMENT GOODS
Example: Sales statement issued by consignee
1
Company A
01.05.2015
Consignor
2
Shop B
Consignee
Goods removed
Sales Statement 25.05.2015
Basic time of supply (Date of Sales Statement)
3
25.05.2015
Time Of Supply
(If no Tax Invoice
issued within 21 days)
21 days rule
05.06.2015
If Tax invoice
issued
15.06.2015
(21 days)
Actual Time Of Supply
(Invoice Date)
44
RETAILING – CONSIGNMENT GOODS
GST Treatment on Supplies Made
When consignor has to account for GST?
Time of Supply (TOS)
 12 months after the removal of the goods,
 Basic TOS : Date after 12 months the
goods were sent
 Actual TOS: Date of tax invoice
Provided that the tax invoice was
issued within 21 days from the basic
TOS
45
RETAILING – CONSIGNMENT GOODS
Example: No sales statement issued by consignee
Company A
1
01.05.2015
Consignor
2
Goods removed
No Sales Statement
Shop B
Consignee
01.05.2016
Basic time of supply (12 months after goods removed)
3
01.05.2016
Time Of Supply
(If no Tax Invoice
issued within 21 days)
21 days rule
05.05.2016
If Tax invoice
issued
21.05.2016
(21 days)
Actual Time Of Supply
(Invoice Date)
46
RETAILING – TRADE-IN GOODS
Sec 15(4)
When a transaction involves trade-in goods, the
consideration for the supply is not wholly in money.
In such a supply, the consideration of supply is the
aggregate of:(i)
the amount in money
as part of the
consideration; and
(ii)
the open market value of the trade-in
goods as part of the consideration.
47
RETAILING – TRADE-IN GOODS
Scenario 1:
Customer is a non-registered
person
supply : new goods
G
RETAILER
CUSTOMER
GT
$
Consideration : Trade-in goods + cash
48
RETAILING – TRADE-IN GOODS
Retailer
Price (+6% GST) of new sofa : RM1,908.00
Consideration
Cash
:
Trade-in old sofa
:
Total Consideration
:
6% GST inclusive :
(RM1,908.00 X 6%/106%)
RM 848.00
RM1,060.00
RM1,908.00
RM 108.00
The retailer accounts for output tax amounting to RM108.00.
49
RETAILING – TRADE-IN GOODS
Scenario 2:
Customer is a registered
person.
supply : trade-in goods
GT
CUSTOMER
(GST registered)
G
RETAILER
(GST registered)
Consideration : new goods
Sec 15(3)
Where the supply is for a consideration not in money, the value of the supply shall
be taken to be an amount, with the addition of the tax chargeable, equal to the
open market value of that consideration.
50
RETAILING – TRADE-IN GOODS
Supply = of old television
Consideration = Open market value of consideration
= price (+6% GST) of new television
= RM1,908.00
Consideration for old television
6% GST inclusive
(RM1,908.00 X 6%/106%)
: RM1,908.00
: RM 108.00
customer has to account for output tax amounting to RM108.00
51
Hire Purchase
52
RETAILING – HIRE PURCHASE
Treated as 2 supplies
- Supply of goods and supply of credit
payment for goods
supplied to buyer
(no GST)
SUPPLIER
Deposit for goods
(GST : Standard rated
- if a part of payment)
Supply of goods
(GST : Standard rated)
Financial
Institution
Supply of credit
(GST : exempt)
Processing fee
(GST : Standard Rated)
Deferred payment
BUYER
53
Credit Sales
54
RETAILING – CREDIT SALES
What is credit Sales?
A sale in which the full amount will be made in
one payment some time in the future or in smaller
regular payments over a period of time.
Purchases made by a consumer that do
not require a payment made in full at the
time of purchase.
Example: Courts, Singer
55
RETAILING – CREDIT SALES
Treated as 2 supplies
- Supply of goods and supply of credit
SUPPLIER
Supply of credit
(GST : exempt)
Supply of goods
(GST : Standard rated)
Processing fee
(GST : Standard Rated)
Deferred payment
BUYER
56
RETAILING – GST Implementation Day
Matters to consider
 price display
 GST inclusive
 tax invoice to show GST chargeable
57
RETAILING – GST Implementation Day
Replace of price tag
New price tag during GST
regime shown is the amount
plus GST chargeable.
Amount inclusive of GST=
RM1060.00
Tax fraction = 6%/106% x
RM1060.00 = RM60.00
58
58
Thank You
GST Unit
Royal Malaysian Customs Department