Goods and Services Tax Quick Check

Supply

- GST is to be charged and levied on:

  • any supply of goods or services made in Malaysia, including supply of imported services and anything treated as a supply under the Act; and
  • any importation of goods into Malaysia.

- GST is charged on any supply of goods and services if the following conditions are satisfied :

  • it is made in Malaysia;
  • it is a taxable supply of goods or services;
  • it is made by a taxable person; and
  • it is made in the course or furtherance of any business carried on by that taxable person
  • Standard-Rated Supply

    Standard-rated supply means a taxable supply of goods or services subject to a positive tax rate. Examples of standard rated supply are sales of commercial properties, medical equipment, textiles and furniture. When a supplier who is a GST registered person supplies standard rated goods or services, he has to charge GST on the supply.
  • Zero-Rated Supply

    Zero-rated supply is a taxable supply which is subject to a rate of zero percent. Examples of zero-rated supply are paddy, fresh vegetables, live animals (cattle, buffalo, goat, sheep and swine), fresh and salted chicken and duck eggs, international services and exports of goods and services.

    Please refer to GST (Zero Rate Supply) Order 2014 for detailed list of zero rated supplies
  • Exempt Supply

    Exempt supply is a supply which is not subject to GST, i.e. no GST is chargeable on such supply. Examples of exempt supply of services are domestic transportation of passengers for mass public transports i.e. by rail, ship, boat, ferry, express bus, stage bus, school bus, feeder bus, workers' bus and taxi, toll highway, private education and private health services. Examples of exempt supplies of goods are residential properties, land for agricultural and land for general use (government building and burial ground).

    Please refer to GST (Exempt Supply) Order 2014 for detailed list of exempt supplies.
  • Out of Scope Supply

    Out of scope supply is a supply which is not within the ambit or boundary of GST. Thus, GST is not applicable on such supply. Examples of out of scope supply are:
    • Non business supply;
    • Supply of goods made outside Malaysia;
    • Supply of services made by a person who does not belong in Malaysia other than the supply of imported services;
    • Business below threshold;
    • Government supply except selected prescribed services;
    • Supply by statutory bodies and local authorities with respect to regulatory and enforcement functions; and
    • Supply of goods or services made within or between designated areas (Labuan, Langkawi and Tioman) except selected prescribed goods or services.

Purchase or Acquisition

- Input tax is the GST incurred on any purchase or acquisition of goods and services by a taxable person for the purpose of making a taxable supply in the course or furtherance of business. These purchases or acquisitions would include:

  • goods or services purchased or acquired locally
  • imported goods
  • imported services

- A person is entitled to claim input tax if he is making a taxable supply and satisfies the following criteria:

  • input tax has been incurred;
  • input tax is allowable;
  • he is a taxable person, i.e. a person who is or is liable to be registered;
  • goods or services acquired in the course or furtherance of business; and
  • goods or services made in Malaysia or any supply made outside Malaysia which would be a taxable supply if made in Malaysia.

- Input tax incurred by a taxable person in respect of the following supplies shall be excluded from any credit under GST:

  • the supply or importation of a passenger motor car
  • the hiring of a passenger motor car
  • club subscription fee
  • medical and personal accident insurance premium or takaful contribution
  • medical expenses
  • family benefits
  • entertainment expenses to a person other than employees or existing customers except entertainment expenses incurred by a person who is in the business of providing entertainment

Export

All goods exported from Malaysia are zero-rated that is GST charged at 0%. This means that an exporter does not collect GST on his exports but he is able to claim GST incurred in his acquisitions as his input tax if he is a taxable person. The exporter may recover the GST incurred by crediting the amount allowable against his output tax chargeable on his taxable supplies.

An exporter can zero rate his supply of goods at the time when the goods are exported. Goods are considered to be exported when:

  • they have been cleared by the proper officer of customs at the last customs station on their route out of Malaysia;
  • they have been loaded on to a vessel or an aircraft which is about to depart from a port or place in Malaysia; or
  • they have been cleared by the proper officer of customs at an inland clearance depot or station on their route out of Malaysia through a customs port or airport.

The exporter must possess valid documents to proof that the goods have been exported

Import

Generally, all imported goods into Malaysia are subject to GST. However, certain goods imported by any person or class of persons are given relief from payment of GST upon importation under the Goods and Services Tax (Relief) Order 2014. An importer who is a taxable person would be eligible to recover the GST paid on imports subject to the normal rules. The recovery of GST incurred on imports is made by crediting the amount allowable against his output tax chargeable on his taxable supplies.

Under the GST Act, "imported services" means any services by a supplier who belongs in a country other than Malaysia or who carries on business outside Malaysia to a recipient who belongs to Malaysia and such services are consumed in Malaysia. When services are imported from outside Malaysia and supplied to a recipient in Malaysia, being taxable supplies if made in Malaysia, the recipient of the supply shall account and pay GST if such imported services are for the business purposes and consumed in Malaysia. Generally, the GST legislation provides for the supplier to charge GST on taxable supplies he makes to the recipient.

However, in the case of imported services, the GST liability shifts from the supplier to the recipient if the recipient's fixed or business establishment or his usual place of residence is in Malaysia.

Hence, the recipient is liable to account GST on the supply made for the purpose of any business carried on by him.

The value of imported goods is determined under the Customs (Rules of Valuation) Regulations 1999. For GST purpose, the value for imported goods will be aggregate of the following:

  • Value determined for customs purposes;

    Value of the goods or transaction value, which is generally shown on the invoice, plus adjustments to be included such as freight, insurance, packing, commission and brokerage, assist, royalty, proceeds and other charges and expenses associated with the transportation of goods until the goods have arrived in the country of importation but not costs incurred after importation.
  • Customs duty paid or to be paid, if any; and
  • Excise duty paid or to be paid, if any.

Registration

Any person who makes a taxable supply for business purposes and the GST exclusive value of the taxable turnover of that supply for a period of 12 months or less exceeds the threshold of RM500,000 is required to be registered for GST.

However, business with taxable turnover of RM500,000 and below, even though not required to be registered, may choose to apply for voluntary registration.

The determination of taxable turnover for GST registration purposes has to include all supplies of goods and services which are taxable, i.e. standard rated supply, zero rated supply, deemed supply as well as disregarded supply.

However, the following taxable supplies will not be included:

  • disposal of capital assets;
  • imported services;
  • supplies made in relation to Warehousing Scheme;
  • supplies made within or between designated areas; and
  • supplies made by a foreign principal or a recipient under the Approved Toll Manufacturer Scheme

A registered person must comply with the requirements under GST legislation as follows:

  • account for GST on taxable supplies made and received, i.e. output tax and input tax respectively
  • submit GST return (GST-03) and pay tax not later than the last day of the following month after the taxable period
  • issue tax invoice on any supply unless as allowed by Customs
  • inform Customs of the cessation of business within thirty days from the date of business cessation
  • inform Customs on any changes of address, taxable activity, accounting basis and taxable period; and
  • keep adequate records of all business transactions relating to GST in the National or English language for seven years.

Tax Invoice & Record Keeping

- The issuing of tax invoice can be classified as follows:

  • Tax invoice
    • i) Full tax invoice
    • ii) Simplified tax invoice
  • Deemed tax invoice
    • i) Self-billed invoice
    • ii) Invoice or statement of sales by auctioneer

- A full tax invoice should contain the following information:

  • the word 'tax invoice' in a prominent place;
  • the tax invoice serial number;
  • the date of issuance of the tax invoice;
  • the name, address and identification number of the supplier;
  • the name and address of the person to whom the goods or services are supplied;
  • a description sufficient to identify the goods or services supplied;
  • for each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, excluding tax;
  • any discount offered;
  • the total amount payable excluding tax, the rate of tax and the total tax chargeable to be shown separately;
  • the total amount payable inclusive of the total tax chargeable; and
  • any amount referred to in subparagraphs (i) and (j), expressed in a currency, other than Ringgit, shall also be expressed in Ringgit in accordance with paragraph 5 of the Third Schedule of the GST Act 2014

Example of Full Tax Invoice (Wholly Taxable Supply)

- There are instances where the Director General may, upon request in writing allow registered persons to issue simplified tax invoice to their customers in accordance with section 33(3) of the GST Act 2014. Issuance of this invoice normally involves retailers who generate large volume of invoices such as hypermarkets, mini markets, restaurants, beauty salons, petrol kiosks, motor workshops and other point of sales outlets.

- A simplified tax invoice can be issued regardless of any sales amount and can take the form of an invoice, receipt, voucher or any other similar document provided it contains the particulars approved by the Director General. For instance, a registered person applies to the Director General to allow him to omit from the full tax invoice the following prescribed particulars:

  • the words "Tax Invoice"
  • the name and address of the recipient; and
  • the price and tax for each item to be shown separately.

- In this case, the Director General may allow such invoice to be issued by the registered person provided the invoice contains the following particulars:

  • the name, address and identification number of the supplier
  • the date of issuance of the tax invoice
  • the tax invoice serial number
  • a description sufficient to identify the goods or services supplied
  • for each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, including tax
  • the total amount payable inclusive of total tax chargeable; and
  • the rate of tax and the amount of tax chargeable

- Simplified tax invoice can be used to claim input tax. In the case of an approved tax invoice without the name and address of the recipient, the allowed input tax amount claimable is RM30.00 or less. If the GST amount is more than RM30.00, he can only claim the input tax up to a limit of RM30.00 using this invoice. Therefore, he must request for a tax invoice with the name and address of the recipient to enable him to claim the full input tax if it is more than RM30.00.

Example of Simplified Tax Invoice (Wholly Taxable Supply)

- Under the GST Act 2014, the Minister may grant relief to any person or class of persons from the payment of the whole or any part of the tax on any taxable supply of goods or services or any importation of goods or class of goods. A taxable person shall be relieved from charging and collecting GST on taxable supply of goods or services made to such person or class of persons. GST should not be charged on the amount of taxable supply and the tax invoice issued to such person shall state the clause "Relieved from charging GST for supply to a person given relief under Item ....., Schedule ...... of GST (Relief) Order 2014".

- Whenever a tax invoice of a particular supply is lost or misplaced, you may request the supplier to provide a certified true copy of the tax invoice as it is an offence to issue more than one tax invoice per taxable supply. This certified copy of tax invoice can be used for claiming input tax as long as the document is clearly marked "COPY" by the supplier.

- A pro forma invoice is not regarded as a tax invoice. You can only claim input tax in your GST return if you have a proper tax invoice. If your supplier does not give you a proper tax invoice, you should ask for one.

- Debit notes are issued by the supplier when the value of the supply is increased after a tax invoice was issued. These notes are issued to correct a genuine mistake or to give a proper debit when there is a change in rate or description; or when adjustments are made in the course of business.

- Credit notes are issued by the supplier when the value for a supply is reduced after a tax invoice has been issued. These notes are issued to correct a genuine mistake or to give a proper credit when there is a change in rate or description; or when adjustments are made in the course of business.

- In accordance with the GST Regulations 2014, the following details should appear in the credit and debit notes:

  • the words "credit note" or "debit note" in a prominent place
  • the serial number and date of issue
  • the name, address and GST identification number of the supplier
  • the name and address of the person to whom the goods or services are supplied
  • the reasons for its issue
  • description of the goods or services
  • the quantity and amount for each supply
  • the total amount excluding tax
  • the rate and amount of tax; and
  • the number and date of the original tax invoice.

Example of Credit Note

Example of Debit Note

- Section 36 of the GST Act 2014 requires every taxable person and certain non-taxable person to keep full and true records of all transactions which affect or may affect his liability to tax. These records should be kept in Malaysia except as otherwise approved by the Director General and shall be in the National or English language, and should be preserved for a period of seven years from the latest date to which the records relate.

- Records are documents which include all books of account or relevant computer print-outs (if a computer is used), as well as supporting documents. If the record is in an electronically readable form, a manual to the software must be available. Records include:

  • all records of goods or services supplied by or to that taxable person including tax invoices, invoices, statement of sales, receipts, credit note, debit note and export declaration forms
  • all records of importations of goods
  • physical books of account, financial statement and paper based source documents including computer printouts of business and accounting records
  • electronic records; and
  • all details of the accounting system, including charts, codes of accounts, instruction manuals, system and program documentation and specification, etc.

- All taxable persons and certain non-taxable persons should keep every reasonable accounting documents and records of all business supplies and acquisitions to enable GST auditors to establish the nature, time and value of all taxable supplies and importation of goods and services, including information which assists in reconciling accounting records with the GST returns submitted.

- Details of any exempt supplies and any method of apportionment used should also be available. The term "records" therefore include the record of all goods and services supplied, received and imported and the applicable rate of tax on all supplies made and received. The specific records that you are required to keep include:

  • Business Entity Records
    Business registration records such as Form 9, Form 13, Form 24 or Form 49.
  • Taxation Records
    • i) GST returns, payment slips and receipts;
    • ii) Export release records, such as exports declaration (K2), records for the taxable goods status and other related records.
    • iii) Import release records such as:
      • * imports declaration (K1, K9), Customs Official Receipt (COR) and value declaration form (K1A);
      • * transportation records such as invoices, delivery orders, packing lists, bill of lading, insurance records, transport charges and other related records;
      • * Letter/Classification Ruling or Decision/Valuation Ruling or Customs Advance Ruling;
      • * exemption letters obtained by the registered person; and
      • * Import Permit;
    • iv) Records and documents to account for any adjustments related to GST input and output tax;
    • v) Inland Revenue declaration forms;
    • vi) GST Summary Sheet;
    • vii) GST adjustment working sheet.
  • Business Transactions Records
    • i) Sale and purchase records such as purchase order/order notes, delivery orders, tax invoices, invoices, receipts, vouchers, cash register roll, debit/credit notes and other related records.
    • ii) Contract records (includes sub-contracts) such as agreements between buyers and sellers or parties involved in business transactions, letter of concession power, joint venture/ leasing/manufacturing agreements, royalty/ franchise/ license and other Intellectual Property Rights (IPR) agreements, agency commission/brokers contract, distribution/ sale and purchase contract and other related records.
    • iii) Correspondence records such as mail, facsimile, e-mail and other related documents.
    • iv) Payment records such as cheques, bank drafts, letter of credit, fund transfers applications, debit advice and other related records.
    • v) Details of any agents acting on supplier/principal's behalf and transactions concluded through agents.
  • Accounting Records
    • i) Audited Financial Report including Profit and Loss Account.
    • ii) Management Account.
    • iii) General Ledger and Subsidiary Ledger
    • iv) Cash Book
    • v) Fixed Asset Register
    • vi) Production records, stock sheet/list and control list;
    • vii) Debtors and creditors lists (in respect of a change in accounting basis)
    • viii) Audit adjustments
    • ix) Journal, acceptance slips, receipts, payment vouchers, payment slips and other supporting records.
  • Other records:
    • i) business goods which were put to non-business use;
    • ii) disposal of business goods, whether or not for a consideration;
    • iii) gifts to customers in the course or furtherance of business;
    • iv) samples given to potential customers in the course or furtherance of business;
    • v) fringe benefits given to employees; and
    • vi) movement of imported goods to/from Licensed Warehouse.

You may require the above information when calculating your GST liability before filling in your GST return.

Updates


Panel Decision 1

  • No invoice with indication of GST can be issued before the implementation date. (sec.183(1) Goods and Service Tax Act 2014 (GSTA 2014).
  • The supplier has to account for output tax on the supply made on or after 1/4/2015 even though invoice is issued or payment is received before 1/4/2015. The payment received and invoice issued is taken to have been received or issued on 1/4/2015 (sec 183 GSTA 2014).
  • The value on the payment received or invoice issued shall be deemed to be inclusive of GST.
  • Claiming of input tax
    After 1/4/15, a GST registered person can claim input tax based on the invoice issued before 1/4/15 as long as the GST ID number of the supplier is stated on the invoice.
  • S.13(4) GSTA 2014 provides that the time of supply for imported services shall, to the extend covered by any payment by the recipient, be treated to have been made when the supplies are paid for;
  • A GST registered person however may account for output tax based on the date of invoice if it is issued earlier than the date of payment.
  • The value for imported services is tax exclusive.
  • A taxable person may claim bad debt relief subject to the requirements and conditions set forth under sec.58 of the GSTA 2014 and the person has not received any payment or part of the payment in respect of the taxable supply from the debtor after sixth months from the date of supply.
  • The bad debt relief must be claimed immediately after the expiry of sixth months from the date of supply.
  • If the bad debt relief is not claimed immediately after the expiry of sixth month, then the taxable person must apply in writing for Director General's (DG) approval on his intention to claim at a such later date.
  • The word 'month' in sec.58 refers to calendar month or complete month -

    Example: Invoice issued at 15th January 2017. The sixth month expires at the end of Jun and the bad debt relief must be claimed immediately in July taxable period.

if royalty has already been included into the customs value during importation, what is the GST treatment on royalty under sec. 13 GSTA 2014?

  • Supply of royalty is a supply of services.
  • GST need to be accounted for on any payment made in relation to imported goods, however if the royalty has been included into customs value when the declaration was made at the time of import, no GST on such royalty need to be charged separately as imported services.
  1. Local company X purchases goods from overseas supplier and later sold the goods to local customer B and issue an invoice (local invoice). The local company X requests the overseas supplier to deliver the goods direct to his local customer B. Whether the supply by the local company X to the local company B subject to GST?
  • there is proof that the transfer of ownership of the goods took place outside Malaysia and before the goods are imported into Malaysia (through shipping document); and
  • the import declaration was in the name of the local company B and the value of the imported goods was based on the local invoice.
  1. Local company X purchases goods from a local manufacturer M and request the local manufacturer M to export the goods to his overseas customer. Whether the supply by the local manufacturer M to the local company X subject to GST?
  • The supply made by the local manufacturer M to the local company X is a standard rated supply, because the transfer of ownership of the goods took place in Malaysia;
  • The supply made by the local company X to his overseas client can be zero rated if the export declaration was in the name of the local company X.
  1. Company ABC in Malaysia (not in Designated Area @ DA) purchases goods from company XYZ in Shah Alam and request the company XYZ to send the goods to ABC's client (MRS Company) in Langkawi (Designated Area). Whether the supply made by the company XYZ to company ABC subject to GST?
  • The supply made by company XYZ to company ABC is a standard rated supply because the transfer of ownership of the goods took place in Malaysia and not in DA;
  • The supply made by company ABC to his client (MRS Company) in Langkawi can be zero rated if the export declaration was in the name of company ABC.

Can businesses use any exchange rate for transaction involving foreign currency?

  • Paragraph 5 of 3rd Schedule of the GSTA requires business to convert the foreign exchange into ringgit -
    • In the case of supply or imported services, at the selling rate of exchange prevailing in Malaysia at the time the supply takes place; or
    • In the case of importation of goods, at the rate of exchange determined by DG at the time applicable for the calculation of customs duty or excise duty and valuation.
  • Therefore, for imported goods, irrespective whether the importer is GST registered or not, he must use the exchange rate determined by the DG;
  • In the case of local supply -
    • The businesses may use any of the following exchange rates published by -
      • BNM;
      • any commercial banks in Malaysia or any other banks registered under BNM;
      • news agencies e.g. Bloomberg, Reuters, Oanda;
      • foreign central banks e.g. European Central Bank and Federal Reserve Bank of New York.
    • The exchange rate must be -
      • the prevailing exchange rate (selling rate) corresponding to the time of supply;
      • consistently used for internal business reporting and accounting purposes; and
      • used consistently for at least one year from the end of the accounting period in which the method was first used.
    • If a GST registered person wants to use an exchange rate other than the rates as in subparagraph iii(a) above, he must apply in writing to the Director General for his approval.

Financial guarantees in relation to loans or payables of subsidiary companies provided by the Company for no compensation, where the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiary companies. What is the GST treatment on this supply?

  • This type of guarantee is not within the scope of financial services under GSTA 2014 and such supply is to be standard rated supply.
  • 'Business' under section 3(1) includes any trade, commerce, profession, vocation or any other similar activity, whether or not it is for profit.
  • Section 3(5) GSTA 2014 provides where any person, in carrying on any trade, commerce, profession, vocation or any other similar activity accepts any office, any services supplied by the person as the holder of the office shall be treated as supplied in the course or furtherance of trade, commerce, profession, vocation or any other similar activity.
  • Office holder/director's fees is subject to GST when a person is carrying on a profession or vocation (professional services such as accountant, advocate and solicitor, engineering, architect, surveyor, consultant or other similar professional services) and he is -
    • employed under contract for service; and
    • accept the position of a holder of an office in his personal capacity;

For supply of utilities, telecommunication, TV paid broadcasting services and other similar supplies, can adjustment be done in the next billing instead of issuing credit or debit note?

  • According to Goods and Services Tax Act 2014, a taxable person making a taxable supply to another taxable person shall issue a credit or debit note and make adjustment in his return when there is a change of any consideration.
  • However, for supply of utilities, telecommunication, TV paid broadcasting services or other similar supplies made to end consumer who is a non-GST registered person, adjustment can be made in the next billing instead of issuing credit or debit note.

Panel Decision 2

Motorcar used exclusively for the business purpose as approved by the DG. To what extend is the application of this provision in term of claiming input tax?

  • Reg. 36 GSTR (Goods and Service Tax Regulation 2014), provides that a taxable person is not allowed to claim input tax in respect of -
    • the supply to or importation by him of a passenger motorcar; or
    • the hiring of motorcar;
  • A 'passenger motor car' is defined in reg. 34 GSTR as a motor car which is constructed or adapted for the carriage of not more than nine passengers inclusive of the driver and the unladed weight of which does not exceed three thousand kilograms but does not include any motor car which is used exclusively for the purposes of business as may be approved by the Director General (reg. 34(e) GSTR).
  • Motor cars used exclusively for business purposes which Director General may approve are -
    • Test Drive car - a car used for a limited period in order to assess its performance and reliability.(Only for car dealers);
    • Cars used for security purposes - a car used by security officers only for patrol in the company's compound to protect the business premise;
    • Cars used in providing technical assistance - a car used mainly in providing technical assistance to company's clients e.g. maintenance services, breakdown services and repair services; AND
    • The cars must fulfill the following conditions -
      • the motor car is registered in the name of the company;
      • the motor car is not let on hire;
      • there is no intention to make the motor car available for private use;
      • the motor car is kept at business premises, used for business trips and must not be taken home overnight by any employee; AND
      • the motor car has the business's name
  • There are motor cars exclusively used for business purpose which Director General may not approve, such as -
    • Assigned Car
      • Assigned car is a car that is assigned to an individual for their full-time use within the parameters of the company's policies and procedures. It is a privilege given to the individual which comes with the post e.g. cars for directors.
    • Pooled Car
      • Pooled cars are cars that are readily available exclusively for business use by a number of employees
    • Cars used in sales and marketing
      The car is commonly used in retail business to promote sales and marketing e.g. cars used by salesman in marketing new products.
    • Demo or display car used to promote new model and usually display in a show room.

Below are expenses usually billed to employees and not to the businesses, can the businesses claim the input tax and how?
- Car park and other travelling expenses incurred while visiting customers or on working trips;
- Mobile phone bill expenses for making business calls on a line registered in their own name;
- Entertainment meals with existing customers;
- Hotel accommodation while on outstation business trip;

  • A registered person claiming input tax must hold a valid document (tax invoice) under his name which is required to be provided under section 33 GSTA (Goods and Service Tax Act 2014) (refer section 33 GSTA and reg.38(1)(a)(i) GSTR).
  • Invoice under employees name cannot be used for claiming input tax EXCEPT for mobile phone bill expenses used for business purpose.
  • A registered person can use the mobile phone invoice billed to his employee for claiming input tax as long as the expenses are reimbursed and accounted as business expenses.

What is the first taxable period for company with financial year end on 31st August and the revenue is below RM5 million, is it -

  • 1st April 2015 to 30th June 2015, second period 1st July 2015 to 30th September 2015? OR
  • 1st April 2015 to 31st May 2015, second period 1st June 2015 to 31st August 2015 (to match with financial year end)?
    • The first taxable period must coincide with financial year of the business. Therefore the taxable period will be on 1st April 2015 to 31st May 2015, second period is 1st June 2015 to 31st August 2015 and third period is 1st September to 30th November 2015;

How to determine the GST on gift?

  • Para 5(2)(a) of the First Schedule of GSTA 2014:

    No GST will be charged on gift made in the course or furtherance of business to the same person in the same year where the total cost of the gift to the donor does not exceed RM500. If the total cost to the donor is more than RM500, GST need to be accounted for and input tax is claimable.
  • The word 'year' in paragraph 5(2) (a) of the First Schedule of GSTA 2014 refers to 'tax year'(financial year).
  • Gift bought by a taxable person from a non-GST registered person worth more than RM500 and given free without consideration is not subject to GST but no input tax is claimable as the gift is acquired without tax.
  • Determination of RM500 per person per year is the aggregate of all gifts given in the tax year. If the total cost exceeds RM500, it is subject to GST (account for output tax) as follows -

    Example:
    Company ABC give gifts to his employee A in 2015 as follows:

    Date Cost GST Time of Supply
    1st Scenario Apr 2015 RM200
    June 2015 RM200
    Nov 2015 RM300
    Total RM700 GST 6% x RM700 = RM42 Nov 2015
    2nd Scenario May 2015 RM700 GST 6% x RM700 = RM42 May 2015

    Company A has to account GST RM42 on the gift in November taxable period for the first scenario and May taxable period for the 2nd scenario.
  • A person who intends to make any taxable supplies can apply for voluntary registration if he can satisfy that he is committed to do business by submitting the following documents:
    • details of business arrangements (e.g. business plans, plants and location);
    • copies of contract for establishment of premises such as rental of premises / construction of pipelines/ purchase of equipment;
    • details of any patents;
    • details of business purchases; or
    • other documentary supporting evidence.


      AND;
    • The total taxable supply is expected to exceed the threshold within 12 months
    • from the date of application.

XYZ Company in Kuala Lumpur (not in Designated Area @ DA) purchases goods from ABC Company in Kuantan and request ABC Company to send the goods to his branch in Langkawi (Designated Area):

What is the GST treatment on the goods send to Langkawi?

  • Goods supplied to a Designated Area (Labuan, Langkawi and Tioman) from Malaysia (other than Designated Area) are zero rated supply (refer Item 3 First Schedule of GST (Zero Rate Supply) Order 2014).
  • The supply made by ABC company to XYZ Company in Kuala Lumpur is a standard rated supply and not zero rated supply unless -
    • there is evidence showing -
      • the goods are moved or shipped directly to XYZ branch in Langkawi (DA);
      • the exporter or consignor in the export form or shipping documents is in the name of ABC Company and the goods are exported to or consigned to XYZ branch in Langkawi; and
    • the invoice issued by ABC Company to XYZ Company in Kuala Lumpur has indication that the 'goods have been directly shipped to XYZ branch in Langkawi'.

A foreign company making taxable supply in Malaysia has to appoint an agent to act on his behalf. The registration of a foreign principal will be under the name of such foreign principal.

Who will be the importer and who is eligible to claim input tax In the case of a registered foreign principal importing goods for the purpose of making supply in Malaysia?

  • Section 65(6) GSTA, provides that an agent appointed by a person who does not belong to Malaysia to act on his behalf shall be liable for the tax and the other requirements imposed under the GSTA as if he is the person who does not belong to Malaysia.
  • Only importer, consignee or owner of the goods imported can claim input tax in relation to importation of goods. (refer reg.38(1)(d) GSTR).
  • For the purpose of importing goods into Malaysia by the foreign principal, the appointed agent under section 65(6) GSTA can appear as the importer in Customs Form No.1 and care off @ c/o the name of the foreign principal. Based on the Customs Form No.1, the foreign principal may issue an authorisation letter to the appointed agent for claiming input tax on his behalf.
  • For goods held on hand on 1/4/2015, can a stock count be performed on a date other than 1/4/2015?
  • Who should certify the claims for special refund?
  • How to calculate the value of the goods held on hand on 1/4/2015?
    • Any person who is entitled to a special refund for goods held on hand on 1/4/2015 under sec. 190 GSTA shall be eligible to claim once;
    • The claim for special refund shall be made in a form as the DG may determine, not later than 6 months from 1/4/2015 (refer sec.191(1)GSTA);
    • Any person claiming the special refund should perform a stock count on goods held on hand on 1/4/2015. However, if the stock count is not done on 1/4/2015, they are allowed to use the results of stock count which has been performed in the past 6 months from 1/4/2015 and then applying the roll forward method to arrive at the stock balances on 1/4/2015. Alternatively, a stock count can be performed in a period no later than 6 months after 1/4/2015 and then applying the roll backward method.

      Under all circumstances, a stock count must be performed within the stipulated time periods, otherwise no special refund will be approved.
    • If the amount of special refund is less than RM10,000, a chartered accountant as conferred by Malaysian Institute of Accountants should certify the amount of the special refund (sec. 191(2)(a)GSTA). If the amount of special refund is RM10,000 or more, an approved company auditor under section 8 of the Companies Act 1965 should certify the amount of the special refund (sec. 191(2)(b)GSTA). A Reasonable Assurance Report performed under the Malaysian Approved Standard on Assurance Engagements, ISAE 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information will need to be issued to support the special refund.
    • The value of the goods held on hand on 1/4/2015 for purposes of the special refund can be ascertained as follows:
      • Specific identification
        If the goods held on hand on 1/4/2015 can be attributed to invoice or Customs Form No. 1, based on specific description, series, no products, brands or other specific identification, such invoice or Customs Form No.1 shall be used.

        Example:
        Goods with serial number ABC123 and the related invoices are invoices issued on 3rd February 2014 as the serial number of ABC123 appeared on the invoices. The value in such invoices can be used for the special refund
      • First in First out (FIFO)
        If the goods held on hand on 1/4/2015 can be directly associated with many invoices due to general product description, value on the latest invoice before the 1/4/2015 shall be used. If the quantity of goods held on hand exceeds the quantity stated in such invoice, the value for the remaining number of goods should be based on the quantity that can be covered in the previous invoices issued in sequence prior to the final invoice before the 1/4/2015.

        Example:
        Total goods held on hand on 1st April 201 Related Invoice Sales Tax Paid
        Description Quantity Date Quantity Price per Unit (RM) Per Unit (RM)
        Sandal 3000 unit 1st March 2015 800 unit 2.00 0.20
        15th December 2014 1,500 unit 1.80 0.18
        1st June 2014 2,500 unit 1.70 0.17
        The value for claiming special refund -
        (800 x RM0.20) + (1,500 x RM0.18) + (700 x RM0.17) = RM549

    • The value determined as in sub (v) can only be used when payment to the supplier has been made.

      Example:
      From the above example, If the latest invoice before 1st April 2015 (1st March 2015) has not been paid by a taxable person, the value for claiming special refund will be -

      (1,500 X RM0.18) + (700 X RM0.17) = RM389

Panel Decision 3

  • Newspapers listed in the Appendix to the First Schedule under the GST (Zero Rate Supply) Order 2014 only covers daily or weekly, in the form of unbound sheets of printed matter consisting mainly of current news of general interest, together usually with literary articles on subjects of current, historical, biographical, etc., interest. They also generally devote a considerable amount of space to illustrations and advertisements.
  • The zero rating does not include journals and other periodicals, issued weekly, fortnightly, monthly, quarterly or half-yearly, either in the form of newspapers or as paperbound publications. They may be mainly devoted to the publications of intelligence on subject of a specialised nature or sectional interest (e.g., legal, medical, financial, commercial, fashion or sporting), in which case they are frequently published by or for organizations of the interest concerned. Or they may be of more general interest, such as the ordinary fiction magazines. These include periodicals published by or for named industrial concerns (e.g., motor car manufacturers) to promote interest in their products, staff journals normally having circulation only within the industrial, etc., organisations concerned and periodicals such as fashion magazines which may be issued by a trader or an association for publicity purposes.
  • The difference between newspapers and journals is the content, frequency, circulation and expiry date as shown below:
    Types Content Frequency Circulation Expiry Date
    Newspaper
    E.g. NST, The Star, Utusan Malaysia, Berita Harian, Sin Chew Jit Poh, Malaysia Nanban, Utusan Borneo or Utusan Sarawak
    mainly of current news of general interest Daily or weekly Society at large Expires at the time of purchase
    Journal/periodicals
    E.g. The Edge, SME, The Times, Reader's Digests, Solusi, Mangga or The Focus
    mainly devoted to the publications of intelligence on subject of a specialised nature or sectional interest (e.g., legal, medical, financial, commercial, fashion or sporting) weekly, fortnightly, monthly, quarterly or half-yearly Specific segment of the society e.g., industrial, medical practitioners, businesses or automotive within the industrial, political, etc., organisations concerned and periodicals such as fashion magazine which may be issued by a trader or an association for publicity purposes. Not applicable

  • Old newspaper is not considered as newspaper. Sale of old newspapers is a standard rated supply because newspaper done for the day would not be sold as a newspaper but more as paper (ordinary meaning i.e. scrap). It can be used as input (recycle) to produce other products (e.g. carton boxes, toilet roll or serviettes). There is also a difference in the tariff code number where the old newspaper falls under the tariff code 4707.30.000 and the tariff code for newspaper is 4902.10.
  • Paragraph 18(3)(b) to the Second Schedule of the GST (Exempt Supply) Order 2014 has defined "healthcare professional" includes a 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 or pharmaceutical services under the jurisdiction of the Ministry of Health.
  • Paragraph 18(2) to the Second Schedule of the GST(Exempt Supply) Order 2014 also defined 'private healthcare facilities' means any premises, other than a Government healthcare facility, used or intended to be used for provision of healthcare services such as private hospital, hospice, ambulatory care centre, nursing home, maternity home, psychiatric hospital, psychiatric nursing home, community mental health centre, haemodialysis centre, medical clinic and dental clinic and such other healthcare premises as specified by the Minister charged with the responsibility for health by notification in the gazettes under the Private Healthcare Facilities and Services Act 1998 (PHFSA).
  • Healthcare professional employed (contract of service) by the private healthcare facilities providing healthcare services to patients is treated as making an exempt supply.
  • Healthcare professional who is not employed by the private healthcare facilities but provides healthcare services to a private healthcare facility under a contract for service or outsourcing services is treated as making a standard rated supply to the private healthcare facilities.

    Example: Locum doctors or a specialist doctors provide their services to a hospital registered under the PHFSA on a contract basis is treated as making a standard rated supply.
  • Office holder/director's fees is subject to GST when a person is carrying on a profession or vocation and he is -
    • employed under contract for service; and
    • accept the position of a holder of an office in his personal capacity;

Examples

No. Type Subject to GST Not Subject to GST
1.

A person appointed as director -

  • in his personal capacity (including government pensioner)
  • on his expertise (example tax consultant, medical specialists, economists, accountants, including management of the company but hold positions in companies that are not subsidiaries/subsidiary)
  • on his personality (example politician or NGO)
2.

A person is appointed as a director on the capacity of his post (contract of services) -

  • civil servants, on office he held
  • company's manager, due to his positions he held and became director in subsidiary or subsidiaries. Those who serve on a contract for services, but appointed on the capacity of the office he held and not under his personal capacity.
3.

A chartered accountant in a listed company is appointed as a director. He also is an expert and qualified person and has his own businesses or hold positions in other companies.

4.

Members of hospitals visitors' board or members of Syariah Advisor which is not under the personal capacity.

Panel Decision 4

How to determine whether the value of supply is nominal or not?

  • Paragraph 3(a) Schedule 2 of the GSTA (Goods and Services Tax Act 2014), provides that supply of goods or services by any society or similar organization registered under any written law shall be treated as not a supply where the supply to its members relates to its aims and objectives and available without payment other than a membership subscription and the value of such supply is nominal.
  • The value of supply is treated as nominal when the cost of supply made by the society or similar organizations to each of its member in a year does not exceed RM100 (one hundred ringgit Malaysia).

Whether businesses can issue tax invoice with GST NIL to their customers before effective date on the trial basis?

  • Section 183 GSTA provides that, tax shall not be charged and levied on any supply of goods or services or importation of goods made before the effective date.
  • Businesses can issue tax invoice with the words 'GST NIL' to their customers one (1) week before effective date on the trial basis and it must indicate that it is for trial only.

For the purpose of reducing compliance cost, can a mixed supplier who is GST registered, instead of issuing normal invoice, issue a tax invoice when making only exempt supply?

  • Every registered person who makes any taxable supply in the course of his business shall issue a tax invoice containing the prescribed particulars (section 33(1) GSTA).
  • A non- registered person shall not issue invoice showing an amount which purports to be a tax.(section 33(10) GSTA)
  • No person shall issue invoice showing an amount which purports to be a tax on non-taxable supply. (section 33(10)GSTA)
  • To avoid confusion to the consumer, the GST registered supplier must not issue tax invoice when only making only exempt supply (non-taxable supply).
  • Every registered person who makes any taxable supply in the course of his business shall issue a tax invoice containing the prescribed particulars (section 33(1) GSTA).
  • A non- registered person shall not issue invoice showing an amount which purports to be a tax.(section 33(10) GSTA)
  • No person shall issue invoice showing an amount which purports to be a tax on non-taxable supply. (section 33(10)GSTA)
  • To avoid confusion to the consumer, the GST registered supplier must not issue tax invoice when only making only exempt supply (non-taxable supply).
  • How the receiver or liquidators need to register GST during GST era?
  • Who should apply for registration, in the case where a company has been wound up before 1.4.2014 but the business operations of making taxable supply were taken over and run by the Receiver and the thresholds after 1.4.2014 is expected to exceed RM500,000?
    • Registration -
      • If the receiver or liquidator is acting under employment of a company and his services are paid to the company, the company will have to apply for the registration.
      • If the receiver or liquidator is acting on his private capacity, he himself will have to apply for the registration.
    • In the case where a company has been wound up before 1.4.2014 but the business operations of making taxable supply were taken over and run by the Receiver and the thresholds after 1.4.2014 is expected to exceed RM500,000, the receiver or liquidator will have to apply for the registration.
  • Whether supply of goods under lease agreement from DA to PCA subject to GST?
  • What if the goods supplied from DA to PCA are not return back to DA after the expiry of the lease agreement but are supplied to another person in PCA under a new lease agreement?
  • If such goods under lease agreement are supplied from DA to PCA before 1.4.2014 and the agreement ends on or after 1.4.2014 is subjected to GST?

Note:
(i) PCA refers to Malaysia other than DA.
(ii) DA refers to Labuan, Langkawi and Tioman.

  • Tax shall be due and payable upon all goods including any goods under any lease agreement supplied from a DA to PCA to all intents as if the supply were importation into Malaysia (section 156(a) GSTA).
  • Tax shall be charged on taxable supply of services made by any taxable person from a DA to PCA or from PCA to a DA but excluding a supply of services which comprises the use of goods under any lease agreement from a DA to Malaysia (section 156(b) GSTA).
  • Section 157 GSTA provides that notwithstanding any provision of this Act, tax shall be charged on all goods or services supplied within Malaysia by a taxable person whose principal place of business is located in a DA.
  • Importation of goods under lease agreement supplied from DA to PCA is subjected to GST as if the supply were importation into PCA and the collection of tax due and payable shall be made in a DA.
  • If the goods supplied from DA to PCA are not return back to DA after the expiry of the lease agreement but are supplied to another person in PCA under a new lease agreement, such supply of leasing services is subjected to GST.
  • If goods under lease agreement are supplied from DA to PCA before 1.4.2014 and the agreement ends on or after 1.4.2014, the proportion of the supply as leasing services on or after 1.4.2014 shall be subjected to GST.
  • Supplier in DA shall register if his threshold of supply for the leasing services to PCA is more than RM500,000 and will have to charge GST.

Whether an individual has to charge GST when making a supply of his commercial property?

  • GST shall be charged by a taxable person in the course or furtherance of business on any taxable supply of goods or services made in Malaysia (section 9 GSTA).
  • Taxable person means any person who is or is liable to be registered under the GSTA (section 2 GSTA). A person is liable to be registered if his total taxable supply of the current month and the next eleven months exceeds RM500,000.
  • Any individual owning commercial property at any one time -
    • make a supply of two commercial properties or commercial land not exceeding 1 acre would be treated as not carrying out business even if the sale is more than RM500,000 in a 12 months period;
    • would also be treated as not carrying out business if there is no intention of making a supply;
    • make a supply of rental services on such property is liable to be registered when the turnover for such supply exceeded the threshold amount of RM500,000.

When there is a land development agreement between a land owner and a developer to develop a land, can the developer issue invoice to the buyer under the developer's own name and account for output tax?

When there is a land development agreement between a land owner and a developer -

  • The land owner (if registered) must charge GST to the developer on the supply of right to use the land or on the supply of land and account the GST;
  • Taxable person means any person who is or is liable to be registered under the GSTA (section 2 GSTA). A person is liable to be registered if his total taxable supply of the current month and the next eleven months exceeds RM500,000.
  • The developer must -
    • charge GST to the land owner on the construction services and other services supplied to the land owner and account the GST; and
    • issue a tax invoice on the supply of the completed property in his name or on behalf of the land owner to the buyer and account the GST.

I have sold a shop lot worth RM1 million. I have made the full payment and S&P signed before 1st April 2015 but the key is handed over on the 5th April 2015? Is the property subject to GST?

  • Supply of land or property made:
    • under agreement for a period or progressively over a period, whether or not at regular intervals and that period begins before the effective date and ends on or after the effective date the proportion of the supply which is attributed to the part of the period on or after the effective date shall be chargeable to tax. (refer s.188 GSTA);



    • under agreement but not for a period or progressively over a period or not under agreement, where any payment received or invoice issued before effective date and the supply is on or after effective date, GST is chargeable as if the payment or invoice is received or issued on the effective date (s.183 GSTA).

Panel Decision 1/2015

Whether a person licensed under the Service Tax Act 1975 or Sales Tax Act 1972 can still issue invoice or debit note after 1/4/2015 for services rendered or goods sold before 1/4/2015?

  • Sections 178 and 181 of GSTA (Goods and Services Tax Act 2014 [Act 762]) expressly provide that though the Sales Tax Act 1972 and Services Tax Act 1975 are repealed, any liability incurred, tax due, overpaid or erroneously paid under those Acts may be collected, refunded, remitted or enforced as if those Acts had not been repealed.
  • Sections 179 and 182 of GSTA further provide that, notwithstanding subsections 178 and 181 of GSTA, any person who is licensed under Sales Tax Act 1972 or the Service Tax Act 1975 shall furnish to the Director General (DG) a return for the last taxable period not later than 28 days from 1/4/2015 or such longer period as the DG may determine.
  • Section 185 of GSTA provides that sales tax under the Sales Tax Act 1972 or service tax under the Services Tax Act 1975 shall not be chargeable for any sales, used, disposal or importation of taxable goods or any taxable services.
  • Decision:
    Taxable person under the Sales Tax Act 1972 or the Service Tax Act 1975 sold taxable goods or rendered taxable services on the last taxable period before 1/4/2015 shall -
    • furnish a return as required under the Sales Tax Act 1972 or the Service Tax Act 1975 for the last taxable period not later than 28 days from 1/4/2015, unless otherwise determined by the DG;
    • issue invoice or debit note which imposes sales tax or service tax not later than 28/4/2015.

Regarding gifts above cost of RM500, received by a taxpayer (B) from another taxpayer (A) and subsequently given away free again by B to C after the gift becomes B's business asset -

  • whether B is entitled for ITC as he received the goods free from A?
  • whether B is liable to account for GST when the goods are subsequently given free to C?
    • Para 5(1) of the First Schedule of GSTA provides that subject to subparagraph (2), where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, the transfer or disposal is a supply of goods by the person.
    • Para 5(2)(a) of the First Schedule of GSTA provides that subparagraph (1) does not apply where the transfer or disposal is a gift of goods made in the course or furtherance of business made to the same person in the same year where the total cost to the donor is not more than RM500;
    • Decision
      Since B has not incurred any cost on the goods he received from A, B is not entitled to claim input tax credit and is not liable to account for GST when the goods are subsequently given free to C.
  • Section 8 of the Price Control and Anti-Profiteering Act 2011[Act A1464] provides that where prices of any goods or charges for any services are determined, such prices or charges shall include all government taxes, duties and any other charges.
  • For the purpose of GST, price displays, advertises, publishes or quotes by registered person on any taxable supply of goods or services shall include GST unless the DG approves otherwise (Section 9(5) and (7) of GSTA);
  • Decision
    • All registered person including online business who makes taxable supply of goods or services shall display, advertise, publish or quote the price inclusive GST. However, price displays, advertises, publishes or quotes by registered person on any taxable supply of goods or services may be exclusive of GST subject that they must state the word goods or services are subject to GST 6% and the price payable is exclusive of GST and the supply is made -
      • only to another registered person; or
      • during transitional period for only 14 days i.e. 1/4/2015 to 15/4/2015. This facility is given for the businesses to complete the process of price labelling or tagging inclusive of GST.
    • Online businesses, though the price display must be inclusive of GST, they may notify customers outside Malaysia that the prices payable for goods or services brought out from Malaysia are not subject to GST.
  • In Designated Area (Labuan, Langkawi and Tioman).
  • Free of charge.
    • Section 155 provides that notwithstanding section 9, no tax shall be charged on any taxable supply of goods or services made within or between the Designated Area (DA) unless the Minister otherwise directs in an order under section 160 of GSTA.
    • Under item 2(c) of the GST (Imposition of Tax for Supplies in respect of DA) Order 2014 [P.U(A)187/2014], tax shall be imposed at the rate fixed under subsection 10(1) of the Act on telecommunication services supplied within or between DA.
    • Decision
      • Supply of SIM card is a supply of right to use telecommunication services and it is a supply of services.
      • Supply of SIM card in a DA is subject to GST.
      • Supply of SIM card in a DA to a non-connected person for free of charge is not a supply and not subject to GST.
  • Section 2 of GSTA defines 'tax invoice' means an invoice required to be issued by a taxable person under section 33 of GSTA.
  • Any registered person who makes taxable supply of goods or services in Malaysia shall issue a tax invoice containing particulars prescribed in regulation 22 of Goods and Service Tax Regulations 2014 [P.U.(A)190/2014] (GSTR) unless otherwise approved by the DG (section 33(1) of GSTA).
  • Section 33(3)(a) of GSTA provides that the DG may approve written application made by a registered person to exclude prescribed particulars subject to conditions as he deems fit to impose. However, the registered person shall include the recipient name and address in the tax invoice upon request by the recipient.
  • Simplified tax invoice refers to tax invoice without full particulars prescribed in regulation 22 GSTR and this tax invoice can only be issued by a registered person who has been granted approval by the DG.
  • Decision
    DG pursuant to section 33(3)(a) of GSTA gives his approval (blanket) to any registered person who makes a supply to end consumer (not businesses), to exclude following particulars in their tax invoices -
    • the word 'tax invoice' (reg. 22(a) GSTR);
    • name and address of the recipient (reg.22(e) GSTR);
    • the total amount payable exclusive of tax.

Panel Decision 2/2015

The classification of residential property will be based on the design features and essential characteristics and attribute of the property. If SOHO meets the above criteria, is the sale of SOHO apartment classified as a residential property?

  • Under Paragraph 2, First Schedule of the GST (Exempt Supply) Order 2014 (P.U (A) 271/2014), any buildings or premises being used for residential purposes, designed or adapted for use or intended to be used as dwelling is exempted.
  • SOHO can be classified as a residential property if the development of such property comply with the requirement of the Housing Development (Control and Licensing) Act 1966 and Housing Development (Control and Licensing) Rules 1989 as follows -
    • letter of planning approval (Surat Kebenaran Merancang) is issued under "residential";
    • approved layout plan and approved layout building is for dwelling purpose;
    • the sale and advertisement permit is issued under the Housing Development Act (Control and Licensing) 1966; and
    • the developer and the buyer enter into a sale and purchase agreement enforced under the Housing Development Rules (Control and Licensing) 1989.
  • What is the GST treatment of such supply?
  • How to determine the value of such supply if it is subject to GST?
    • Supply of commercial property (build and sell) by the developer to the purchaser under an agreement for a period or progressively over a period, whether or not at regular intervals and that period begins before the effective date and ends on or after the effective date the proportion of the supply which is attributed to the part of the period on or after the effective date shall be chargeable to tax. (refer s.188 GSTA).
    • Only the value of the proportion of the supply which is attributed to the part of the period on or after the effective date shall be chargeable to tax.
    • To determine the value of the supply, the developer must ensure that the method he uses is consistent with the industry practice and acceptable under the General Accepted Accounting Principle (GAAP)
  • Where an insurer or takaful operator has fulfilled the conditions under sub regulations 47(1), (2) and (3), he is entitled to credit of input tax deemed incurred known as "deemed input tax".
  • The insurer or takaful operator is not entitled to credit of deemed input tax when an insurer or takaful operator makes a cash payout to a policyholder/insured or a third party where the cash payout relates to an acquisition of goods or services, which is an exempt supply, zero rated supply, a supply not within the scope of GST or the credit is disallowed under regulation 36.
  • A person claiming a special refund equal to twenty per cent of the value of the goods hold on the effective date must prove that he has paid the amount as shown on the invoice (refer section 190(2)(C) GSTA). Whether the date of payment is before or after the effective date?
  • Does the special refund apply to sales tax goods purchased on 5 March 2015 and paid on 4 April 2015 by reason of 30 days credit term given by the supplier?
  • Whether the following goods which are taxable under the Sales Tax Act 1972 which are held on hand on 1/4/2015 and sales tax has been paid before 1/4/2015 are eligible for special refund -
    • Unsold stock returned by buyer to the seller.
    • Petrol and Diesel.
    • Zero rated goods.
    • Under section 190 GSTA, a person is entitled for a special refund (100% or 20%) if the goods he holds on hand are taxable under the Sales Tax Act 1972 and the sales tax charged on such goods or the amount shown on the invoice has been paid by the claimant before 1st April 2015. However, if there is a credit term given by the supplier, the special refund is allowed to be claimed only if the total value of the invoice is paid before 30th May 2015.
    • The following goods do not qualify for a special refund:
      • goods which have been sold and subsequently repurchased (buy back) by the supplier or returned to the supplier before 1st April 2015;
      • petrol Ron 95 and diesel; AND
      • The goods listed under the GST (Zero Rated Supply) Order 2014.
    • Special refund is allowed for unsold stock returned by customer (before 1st April 2015) being the result of delivery of wrong quantity, poor or defective quality of goods or erroneous despatch of un-contracted goods in accordance with Regulation 19C of the Sales Tax Regulations 1972.
  • Tax shall not be charged and levied on any supply of goods or services or importation of goods made before the effective date (s.183 (1) GSTA).
  • S. 183(3) GSTA provides that the value of the supply under subsection (2) GSTA, the payment received or any amount stated in the invoice issued shall be deemed to be inclusive of tax.
  • For the purpose of GST, credit note or debit note is allowed to be issued by any registered person to another registered person only when there is a change in consideration for the supply either due to change of rate of tax in force under s.10 GSTA, a change in the descriptions of the zero rated or exempt supply under section 17 or 18 of the Act or adjustment in the course of business (s.35 GSTA and reg. 25 GSTR)
  • During transitional period, a value of supply is deemed to be inclusive of GST. If a debit note is issued after the effective date in order to recover the amount shown on the debit note would be deemed to be part of the total consideration for the supply.

    Example;

    Invoice issued before effective date for the supply after effective date amounting to RM1000. Debit note raised after effective date RM60.00. Total GST is computed as follows:

    6/106 x RM1060 = RM59.99

Panel Decision 3/2015

  • Any registered person (recipient) who meets the requirements and conditions stipulated in section 33 GSTA and regulation 22 GSTR to use a self-billed invoice, may apply for DG's approval by submitting a Self-Billed Invoice Declaration.
  • The Self-Billed Invoice Declaration form can be down-loaded from GST portal via Legislation and Guide field.
  • The Declaration must be affirmed before a Commissioner of Oath and to be submitted to the nearest customs office together with the list of the suppliers who have agreed to a self-billed invoice. The copy of the Declaration is to be kept by the recipient as internal records.
  • Once the Declaration has been submitted to the nearest customs office, the recipient may issue a self-billed invoice without any further approval from DG.
  • Additional Declaration must be made and submitted if there is additional supplier.
  • Whether existing stock of invoices can be stamped with the word 'tax invoice' and used by a registered person until the stock last?
  • Whether a full handwritten tax invoice can be issued by a registered person?
    • The existing stock of invoices which were pre-printed before 1 April 2015 and which were not GST compliant can be used by a supplier who is a registered person until 30th September 2015 or while stock last whichever is the earlier subject to the following conditions -
      • the invoices and copies of such invoices must be stamped with the word 'tax invoice' (for full tax invoice), 'GST registration number' and 'rate of tax';
      • the invoices and copies of such invoices must contain all particulars prescribed in the regulation 22 of GSTR (GST Regulations 2014);
      • the copies of such invoices must be kept and preserved for a period of seven years; and
      • beginning 1st October 2015, the registered person excluding 'retailers' must use a computer generated invoice or pre-printed invoice which is GST compliant.
    • In the case of 'retailers', they must use a GST compliant point of sale (POS) system or a GST compliant cash register to issue GST tax invoices beginning 1st October 2015.
    • The 'retailers' in this item refers to the following categories of businesses -
      • Hardware shop.
      • Restaurant including coffee shop.
      • Mini market, grocery and sundry shop.(d) Book store.
      • Pharmacy.
      • Places of entertainment.
    • A GST registered person is not allowed to issue any handwritten tax invoices.
  • Section 33 GSTA provides that except as otherwise provided in this section, every registered person who makes any taxable supply of goods or services in the course or furtherance of any business in Malaysia shall issue a tax invoice containing the prescribed particulars. Failure to issue a tax invoice is an offence.
  • Every registered person who makes any taxable supply of goods or services in the course or furtherance of any business in Malaysia shall issue a tax invoice to his buyer within 30 days from the date of supply or the date of payment made on such supply (in full or in part).

Panel Decision 4/2015

The supply made by LC to LB will qualify for an out of scope supply, subject to compliance with the following conditions -

  • There is proof that the transfer of ownership of the goods took place outside Malaysia before the goods are imported into Malaysia (through shipping document or incoterm);
  • The import declaration was in the name of LB and the value of the imported goods was based on the local invoice which stated that the goods are originated from OS;
  • LC must keep and maintain the following documents -
    • Purchase order from LC to OS;
    • Invoice from OS to LC;
    • Tax invoice issued by LC to LB stated that the goods are originated from OS;
    • Written instruction from LC to OS that the purchase goods is to be exported to LB; and
    • Proof of payment from LC to OS and from LB to LC;
  • LB must keep and maintain the following documents -
    • Purchase order from LB to LC;
    • Tax invoice issued by LC to LB;
    • Proof of payment from LB to LC;
    • Import declaration form under LB's name as consignee;
    • Bill of lading / airway bill stating the following details:
      • (aa) OS as the shipper;
      • (bb) LB as the consignee;
      • (cc) LC as a notify party.
  • Any other necessary conditions as the Director General may require from time to time.
  • The supply of goods made by LM to LC is a standard rated supply, because the transfer of ownership of the goods took place in Malaysia. However such supply will qualify for a zero rate subject to compliance with the following conditions -
    • The supply is related to goods other than wine, spirit, beer, intoxicating liquor, malt liquor, tobacco and tobacco products;
    • LM must keep and maintain the following documents -
      • Purchase order from LC to LM;
      • Tax invoice issued by LM to LC and shipped to OB;
      • Written instruction from LC that the purchase goods is to be exported to OB;
      • Proof of payment from LC to LM;
      • Export document such as K2/K8 where it is stated that the consignor is LM and the consignee is OB; and
      • Bill of lading / airway bill stating the following details:
        • (aa) LM as the shipper;
        • (bb) OB as the consignee; and
        • (cc) Indicate under column "Notify Party" the details of OB or his representative and LC as the owner of the goods.
    • LM must export the goods within 60 days or any extended period as approved by the Director General (DG) from the time of supply;
    • Time of supply for LM is the date of invoice issued or payment received, whichever is the earlier;
    • The local company (LC) must keep and maintain the following documents -
      • Purchase order from OB to LC;
      • Invoice issued by LC to OB; and
      • Proof of payment from OB to LC;

      AND

    • Any other necessary conditions as the Director General may require from time to time.
  • If LM does not have possession of the goods to be exported or control over the export arrangement he must treat the sales as local supply and subject to GST at standard rate.
  • The supply of goods made by LC to OB1 is subject to GST at standard rate and not qualify for zero rate as the goods were delivered into PCA.
  • The goods exported by LA to OB2 are zero rated supply with conditions that the export form Customs No.2 and shipping documents indicated that the consignor is LA and the consignee is OB2.
  • Such supply of goods to the overseas buyer (OB) will qualify for a zero rate subject to compliance with the following conditions -
    • The supply is related to goods other than wine, spirit, beer, intoxicating liquor, malt liquor, tobacco and tobacco products;
    • LS must prove that the goods is physically removed into FCZ and sent to TP;
    • LS must keep and maintain the following documents -
      • Invoice issued to the overseas buyer;
      • Export, transit and other related documents such as customs forms and shipping documents as required under the customs legislation; and
      • Written instruction/agreement by the overseas buyer to send the goods to a third party in the FCZ for value added activity or consolidation.
    • TP must keep and maintain the following documents -
      • Export documents such as invoices, customs forms, free zone forms and shipping documents to prove that the goods have been physically exported overseas; and
      • Other related documents received from the supplier.

      AND

    • Any other necessary conditions as the Director General may require from time to time.
  • If the goods are not exported physically overseas, TP is liable to account the GST at a standard rate.
  • Such supply of goods to the overseas buyer (OB) will qualify for a zero rate subject to compliance with the following conditions:
    • The supply is related to goods other than wine, spirit, beer, intoxicating liquor, malt liquor, tobacco and tobacco products;
    • LS must prove that the goods are physically removed into LW and sent to TP;
    • LS must keep and maintain the following documents -
      • Invoice issued to OB;
      • Export, transit and other related documents such as customs forms and shipping documents as required under the customs legislation; and
      • Instruction/agreement by OB to send the goods to a third party in the LW for value added activity or consolidation.
    • TP must keep and maintain the following documents -
      • Export documents such as invoices, customs forms and shipping documents to prove that the goods has been physically exported overseas; and
      • Other related documents received from the supplier;

      AND

    • Any other necessary conditions as the Director General may require from time to time.
  • The goods removed from the LW must be exported directly to overseas.
  • If the goods are not exported physically overseas, TP is liable to account the GST.
  • Such supply of goods will qualify for a zero rate subject to compliance with the following conditions -
    • The supply is related to goods other than wine, spirit, beer, intoxicating liquor, malt liquor, tobacco and tobacco products;
    • The supplier must issue invoice before the goods are exported to the overseas buyer;
    • The time of supply will be invoice issued or payment received whichever is the earlier;
    • The goods are physically exported within 60 days from the time of supply or any extended period as approved by the Director General (DG);
    • The supplier must export the goods in his name through his appointed freight forwarder or through his overseas buyer's appointed freight forwarder;
    • The supplier must keep and maintain the following documents -
      • Agreement with the overseas buyer which shows that they agreed to such transaction;
      • The export, transit and other related documents such as customs forms and shipping documents as required under the customs legislation;
      • Purchase order from overseas buyer to the supplier;
      • Supplier's sale invoice to overseas buyer; and
      • Any other records as the DG may determine.

      AND

    • Any other necessary conditions as the Director General may require from time to time.
  • If the goods are not exported physically overseas within 60 days from the time of supply or any extended period as approved by the Director General (DG), the supply to the overseas buyer is a standard rated supply and the supplier has to account the GST at a standard rate.
  • The supplier will not qualify for zero rating if he does not have in his possession the goods to be exported or does not have control over the export arrangement.
  • The non-recurring expenses (NRE) incurred for the purchase of moulds, dies, tooling, jigs, fixtures and related equipment used specifically for overseas buyer (OB) in the contract manufacturer's (CM) premises is not subjected to GST if the cost recovery does not include any element of value add.
    Example - purchase of mould by CM is RM100,000 and the recovery from the OC is also RM100,000 hence such cost recovery is not subject to GST.
  • The treatment above is subject to compliance with the following conditions -
    • Ownership of NRE must be OC and not to be accounted as asset by CM;
    • Must have a written agreement/contract between CM and OC regarding the NRE and the exportation of manufactured goods;
    • The NRE relating to the purchased goods are used wholly to manufacture goods to be exported to overseas buyer;
    • NRE are incurred to manufacture goods according to specifications by OC;
    • The CM keeps and maintain export and other related documents such as Customs No.2/8 forms, airway bill, manifest, invoice, purchase order, payment records, etc.;
    • When the moulds, dies, tooling, jigs, fixtures and related equipment and its components are no longer to be used as specified in the contract, these goods must be returned to the OC. If such goods are disposed locally, it is subject to GST at standard rate;
    • AND

    • Any other necessary conditions as the Director General may require from time to time.

Panel Decision 5/2015

Whether local car manufacturers can use CJP1 form to claim special refund for cars held on hand on 31/3/2015 for which sales tax and excise duty have been paid but yet to be sold to distributor.

CJP1 form is the form used for the payment of sales tax prior to GST implementation.

CJP1 form can be used as a valid document for local car manufacturer to claim special refund equal to the amount of sales tax that has been paid on the cars held on hand on 31.3.15 provided that:

  • The claimant has fulfilled the requirements under S190 of GSTA; and
  • the CJP1 form contains list of chassis and engine number of the cars.

Who can claim special refund of full amount of sales tax paid in respect of imported CBU cars held on hand on 31.3.15?

Any person who wants to claim 100% special refund of sales tax paid on imported CBU cars held on hand on 31/3/2015 must:

  • have an import document in his name whether as importer, consignee or owner of the car for which sales tax has been paid (paragraph 190(1)(d) GSTA); and
  • fulfil other conditions and requirements specified in section 190 and 191 of GSTA.

Whether stock of raw materials or components to be used for making a taxable supply held on hand on 31.3.15 for which sales tax has been paid before 1.04.15 are eligible for a special refund claim?

The stock of raw materials or components to be used for making a taxable supply held on hand on 31.3.15 for which sales tax has been paid before 1.04.15 are eligible for the special refund claim with conditions that such stock of raw materials or components -

  • have not been used partially or incorporated into other goods;
  • must be used only for business purposes; and
  • fulfil other requirements set-forth in section 190 GSTA.

Example:

  • A distributor bought cars (under warranty) from overseas supplier and import into Malaysia to be sold to a dealer.
  • The dealer sold the car to customer with warranty..
  • The customer later claimed warranty on spare parts / car servicing at no charge from the dealer as it is still under warranty..
  • The dealer issued warranty claim for labour charges to the distributor..
  • The distributor made payment to the dealer on the labour charges..
  • The distributor then issue warranty claim to overseas supplier for the payment made to the dealer..
  • Section 188(3) GSTA provides that no tax shall be charged on a supply made under a warranty that relates to goods or services whether expressed, implied or required by law and the value of the warranty is included in the price of the goods or services.
  • Therefore, no tax shall be charged on the supply of spare parts / car servicing under warranty by the dealer to the customer if the value of the warranty is included in the price of the goods or services.
  • The cost recovery for the labour charges claimed by -
    • the dealer from the distributor; and
    • the distributor from the overseas supplier;
    is a reimbursement which subject to GST at a standard rate.
  • A gift of goods made in the course or furtherance of business to the same person in the same year where the total cost to the donor is more than five hundred ringgit, is a supply (refer subparagraph 5(2) First Schedule of GSTA).
  • Whether or not a registered person claims the input tax on the goods, the registered person still has to account for GST if the gift of goods is worth more than RM500.
  • Recovery of expenses may be treated as disbursement or reimbursement and this will depend on whether the expenses are incurred by a principal or an agent acting on behalf of a client.
  • GST treatment on disbursement and reimbursement are as follows -
    Disbursement Reimbursement
    Not a supply Is a supply
    Not entitled for input tax claim Entitled for input tax claim
  • In general, the criteria for disbursement and reimbursement for GST purposes are as follows -
    Disbursement Reimbursement
    Incur expenses as an agent acting on behalf of the client. Incur expenses as a principal.
    The client is the recipient of the supply (invoice is in the client's name) The client is not the recipient of the supply (invoice is in the principal's name).
    The client is the person responsible to pay for the supply The principal is the person responsible to pay for the supply.
    The payment is authorised by the client. The payment is authorised by the client. The payment is not authorised by the client.
    The client knew that the supply is made by a third party. The client has no knowledge that the supply is made by a third party.
    The exact amount is claimed from the client and the agent has no right to alter or add on the value of the supply. The principal has the right to alter or add on the value of the supply.
    The payment is clearly an additional to the supply made to the client. The payment is for the supply made to the client.

The transport service provider under item 4, Second Schedule of GST (Zero-Rated Supply) Order 2014 refers to a carrier such as airline or shipping line and includes -

  • in relation to passenger, a travel agent or ticketing agent who sell the international travelling ticket acting in his own name.
  • in relation to goods, the following -
    • shipping agent acting in his own name.
    • freight forwarder who contracts with a carrier to move the goods.
    • Non-Vessel Operating Common Carrier (NVOCC).
    • courier service provider.

** All the information stated above is for reference purpose only and most of the recommendations are the general guide. Specific recommendation might be required for some of the businesses. We strongly encouraged you to engage our GST consultation services by sending in your request to info@gst.com.my

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