an introduction to gst in malaysia

By Ken Woo

CA(M), ACCA(UK), BSc(First Hons)

Current Consumption Tax

10% sales tax + 6% service tax

Sales Tax and Service tax

On manufacturing and

importation

On prescribed service e.g. restaurant,

accommodation, professional

services, etc.

General concept of GST

BUSINESS

SHIRT

MANUFACTURER

Raw materials –

textiles, button,

zippers

Rent - factory

Utilities –

electricity, water,

telephone

Goods

(shirt)

GST on inputs

= Input TaxGST on output

= Output tax

INPUT OUTPUT

Claimed

input tax

General concept of GST

BUSINESS

RENTAL OF

BUILDING

Raw materials –

building material

and equipment

Legal service,

architectural

service

Utilities –

electricity, water,

telephone

Rental of office

space / building

GST on inputs

= Input Tax

GST on output

= Output tax

INPUTOUTPUT

Claimed

input tax

Proposed GST Model

A common tax on

Supplied in or

imported into

Malaysia

Sales tax

• 5%, 10% & specific rate

• Various threshold

Service Tax

• 6%, various threshold

Goods and Services Tax ( GST)

Rate = 6% , Threshold = RM500000

To replace current taxes

Proposed GST Model

(1) Supply

Made in Malaysia

Taxable supply

By taxable person

For the purpose of business

Scope of tax

(2) Importation of goods/ services

Subject to GSTNot subject to

GST

NO

NO

NO

NO YES

YES

YES

YES

YES

Proposed GST Model

Types of supply Output Tax Input Tax

Standard – rated 6% Claimable

Zero – rated 0% Claimable

Exempt No Not Claimable

Proposed GST Model (Zero-rate

Supply)Agriculture

products – paddy & fresh vegetables

Foodstuff- rice, sugar, table, salt,

plain flour, cooking oil

Livestock supplies – meat, muttons,

swinePoultry & eggs

Fish, prawn, cuttlefish, crabs,

oyster, cockles, etc

Supply of the first 300 units of electricity to

domestic users

Supply of water to domestic users

Exported goods and services

0%

Proposed GST Model (Exempt Supply)

Rail Buses Taxi/Hired car

Highway tollWater

Transportation Land for

general use

Private health & education

Residential Property

Financial services

Proposed GST Model

- GOVERNMENT SERVICES

Local Authority & Statutory Body

� Supplies made in the regulatory and enforcement (R&E) functions�Out scope

� R&E – as stated in enactment law� E.g. assessment rate collection, issuance of licenses,

penalty

� Non R&E to be standard rated�Business activities

� E.g. rental facilities

GST SchemesThese schemes generally help to ease the cash flow for businesses and help create a pro-business environment.

� Approved Trader Scheme (ATS)�To help the cash flow of major exporters who have

significant imports where GST on imports is suspended

� Approved Toll Manufacturer Scheme (ATMS)�Local toll manufacturer is not required to charge GST

when you are instructed by your overseas customer to deliver your finished goods to his customers in Malaysia

�Your value added services to your overseas customer is treated as a disregard supply.


� Approved Jewelers Scheme (AJS)�GST suspended on gold and precious metal acquired

by jewellery manufacturers.

� Flat Rate Scheme�To allow farmers to collect additional charges at

specific rate from the buyers

� Margin Scheme�Second hand car dealers to charge and account GST on

the gross margin on the goods he sells


� Warehousing Scheme�GST suspended in public and private warehouse to

minimise red tape and bypass the GST process.

�Goods from warehouse to designated areas regarded as export at a zero rate.

� Tourist Refund Scheme�Tourists allowed to claim a refund of GST incurred on

purchases made in Malaysia if the goods are bought out of Malaysia

GST Mechanism Tax computation on STANDARD RATED SUPPLY

Business

entity

Sales (RM) Tax on Output

(RM)

Tax on Input

(RM)

Net Tax Paid

(RM)

Supplier 10.00 0.60 0 0.60

Manufacturer 50.00 3.00 0.60 2.40

Wholesaler 70.00 4.20 3.00 1.20

Retailer 100.00 6.00 4.20 1.80

GST collected by the Government 6.00

GST Rate at 6%

Final consumer pays RM 106.00

Supply

Meaning of Supply

� To serve, to furnish, to provide something

� In the case of goods- the transfer of title or ownership, outright cash or credit sale, hire purchase, etc

� In the case of services- the provision of services

� Anything done for consideration

� Sale, barter, exchange, license, rental, lease, right to use, gifts or disposition

� Linked to the supply

� Everything received in return for the supply of goods or services (in monetary or non monetary terms)

Supply

Meaning of Supply (cont.)…

� Certain transactions are treated as not a supply

� Transfer of going concern (neither supply of goods nor services)

� Services provided for no consideration

� Goods given for no consideration can be deemed to be a supply

� Disposal of business assets

� Business gifts (>RM500)

� Private use of business asset

Taxable Person

� Meaning of Person� Includes individual, corporation, Federal Government,

State Government, statutory body, local authority, society, trade union, co-operative society, joint venture, trust, partnership and any other body, organisation, association or group of persons, whether corporate or unincorporated

� Scope � Includes natural and juridical persons

� Individual, sole proprietor and partnership

� Company, club, association, society, co-operative, trade union, non profit body and unincorporated bodies

� Trust, trustee, executor, administrator and joint venture

� Federal Government, State Government, statutory body and local authority

Taxable Person

Meaning of Taxable Person

� A person who is registered for GST

� A person who is required to be registered for GST

� Making taxable supplies of goods or services in Malaysia; and

� Business taxable turnover has exceeded the prescribed threshold

(RM500,000 per year)

� Performs any commercial activity, whatever the purpose

or results of that activity

� Conduct business on a continuing or occasional basis

Out of Scope Supply

�Supplies which are not subject to GST

�Supplies by non registered person

�Supplies not in the course or furtherance of business

�Supplies made outside Malaysia

�Example

�Supplies by hawkers – not reach the threshold

�Supply of service by employer to his employee –supply for employment purpose

�Supply of an overseas branch of a Malaysia Company in that country

What is – other ‘non taxable’ supply

�Gift (< RM500) & Sample (industrial or

commercial)

�GST is not applicable

�Input tax claimable

� Token, stamp (excluding postage) & Voucher

�GST is not applicable

� Input tax claimable

� Pension, provident or social security fund

� Supply by any society to member without payment

� Supply by any society to sponsor (of no commercial value)

� Subsequent supply of blocked input supply

What is – other ‘non taxable’ supply

No

GST

& IT

C

Deemed self supply

Deemed Self Supply

�The recipient is treated as ‘supplier’ of the

taxable supplies and then he acquired back

the supplies

�The recipient has to account and pay for the

tax

�Imported services recipient

�Includes not taxable person

Payment of royalty fees to overseas resident for the use of the services in Malaysia?

The supply is treated as imported services by the recipient belonging in Malaysia.

Type of supply – imported services

Example:

• Royalty fees charged by non resident business

situated outside Malaysia from Jan-Dec 2016

• Date of invoice 10 March 2016

• Bank prevailing rate 10 March 2016

Calculation for GST:

• Consideration for the supply @ RM 2.50

• GST to be accounted by recipient @ 6%

GST

USD 200,000

RM2.50

RM500,000

500,000 x [6/106]

RM28,301.88

Reverse Charge Mechanism

• Imported services: leasing services by AAA di Singapore

• Recipient: BBB Sdn Bhd (berdaftar dibawah ACBP)

• BBB Sdn Bhd need to account in GST-03 the input and output tax

• Time of supply: When payment is made

• Value of supply: Payment received

AAA BBB Sdn Bhd

Leasing of Vessel

Payment:

Sing $200,000

Supply to

himself

Output tax:

Input tax:

Place of supply

RULES FOR GOODS s.12(1)-(3)

Goods treated as supplied in Malaysia

• Removal from a place in Malaysia to another place in Malaysia (local supply)

• Removal from a place in Malaysia to a place outside Malaysia (export)

Goods treated as supplied outside Malaysia

• Removal from a place outside Malaysia to a place inside Malaysia (import)

• Removal from a place outside Malaysia to another place outside Malaysia (out of scope)

Time of Supply

General time of supply rules

• Determines when tax becomes due and payable– Basic tax point

Basic tax point

• For goods– Time when goods are removed

– If goods are not to be removed, time when goods are made available

• For services– Time when services are performed

Exceptions to general time of supply rules

• Actual tax point

Actual tax point

• If tax invoice is issued or payment received before basic tax point– Time when tax invoice is issued or payment is

received, whichever is the earlier

• If no payment is received before basic tax point and tax invoice is issued within 21days from basic tax point– Time when tax invoice is issued

Time of Supply

Scenario 1

Time of Supply

26 May 28 May 2 June

Tax invoice issued Payment received Goods removed

(basic tax point)

Time of

supply

Time of supply is on 26 May

Date of tax invoice issued

Scenario 1

Time of Supply

26 May 2 June 5 June

Tax invoice issued Goods removed

(basic tax point)

Payment received

Time of

supply

Time of supply is on 26 May even though

payment is received after basic tax point

Scenario 2

Time of Supply

28 May 30 May 2 June

Tax invoice issued Goods removed

(basic tax point)Payment received

Time of

supply

Time of supply is on 28 May

Date of payment received

Scenario 2

Time of Supply


Tax invoice issuedGoods removed


Time of

supply

Time of supply is on 28 May even though

tax invoice is issued after basic tax point

Scenario 3

Time of Supply




Time of

supply

Time of supply is on 6 June

Date of tax invoice issued

Within

21 days

Scenario 3

Time of Supply




Time of

supply

Time of supply is on 6 June even

though payment is received before

the date of tax invoice

Within 21 days

Time of Supply

Goods under approval or sale or return terms (consignment goods)

• Supply has not taken place until customer approves the goods and confirms the sale

• Removal of goods to the customer will not trigger a tax point

Time of supply is the earlier of

• The date when the supply becomes certain to have taken place

• 12 months after removal of goods

Goods under approval or sale return terms (consignment goods)

Scenario 1

Time of Supply

1/7/2015

• Contract signed

1/8/2015

• Goods delivered to customer

1/4/2016

• Customer sold goods and issued statement

15/4/2016

• TAX INVOICE ISSUED

1/5/2016

• Date of payment

ToS

Goods under approval or sale return terms (consignment goods)

Scenario 2

Time of Supply

1/7/2015

• Contract signed

1/8/2015

• Goods delivered to customer

31/7/2016

• 12 months lapsed

15/8/2016

• Customer sold goods and issued statement

1/2/2017

• Tax invoice issued

ToS

Other Time of Supply Rules

Private use or non business use

• The time when the goods are appropriated to

the use

Private use or non business use

• Usage of goods involves a period of time

• Time of supply is on the last day of supplier’s

taxable period

Value of Supply

4 situations

• Consideration wholly in money

• Consideration not in money (in kind)

• Consideration not wholly in money (partly in

money and partly in kind)

• No consideration

Value of Supply

Consideration wholly in money

Value = Consideration in money – GST

example:

A company sells a printer for RM318 (GST inclusive)

GST = Tax Fraction × Consideration

= �

��× RM318

= RM18

Value = RM318 - RM18

= RM300

Value of Supply

No Consideration

Value = Open market value - GST

example:

A company shop donates a laptop to a school. Open market value of laptop is RM3,180

GST = Tax Fraction × Consideration

= �

��× RM3,180

= RM180

Value = RM3,180 - RM180

= RM3,000

Value of Supply

Excise duty

• Value of supply includes excise duty paid or is to be paid Example:A manufacturer sells 1,000 liters of alcohol for RM3,000. Excise duty on each liter of alcohol is RM2.50.

Price of 1,000 litres alcohol Excise duty Total priceGST 6%Amount due from customer

= RM 3,000

= RM 2,500

= RM 5,500

= RM 300

= RM 5,830

Token, stamp or voucher

• Subject to GST if exceeds monetary value

Foreign exchange

• Converted in ringgit at the prevailing rate at

the time when supply is made

• Rate of exchange determined by the Director

General for imported goods

Other Value of Supply Rules

Open market value

a) Consideration in money which goods or services generally fetch if supplied substantially, being a supply freely offered and made between persons who are not connected

b) If paragraph (a) cannot be used, the value of similar supply in Malaysia

c) If paragraph (a) or (b) cannot be used, the value is determined using reasonable means which provides objective approximation of the consideration in money

Value of Supply

Connected person

• Officers or directors of one’s business

• Partners in business

• Person holds 5% or more of voting stock or share

• One of them controls the other

• Both of them controlled by a third person

• Together they control a third person

• Members of same family

Value of Supply

Taxable period

• Regular interval period where a taxable person accounts and

pays GST to the government

• The registered person will be allocated monthly and quarterly

taxable periods according to the annual business turnover on

the approval of GST registration as below:

– Annual turnover not exceeding RM5 million – Quarterly

– Annual turnover exceeding RM5million – monthly

Last Date to Furnish GST Return

The GST return is required to be furnished to the Customs not

later than the last day of the month following the end of the

taxable period

Mandatory Registration

Liability to register

• Any person who makes taxable supply of goods and services in Malaysia

• Registration is mandatory for businesses whose taxable turnover has exceeded the prescribed threshold of RM 500,000

• Calculation of taxable turnover for registration is based on total value of taxable supplies for 12 months period

• Persons include:� Individual, sole proprietor, partnership, company, trustee,

society, trade union, club, association, etc.

� Government agencies, local authority, statutory body in the business of making taxable supplies

Determination of taxable turnover

• Total value of taxable supplies of any month

and the previous 11 months (Historical

turnover)

OR

• Total value of taxable supplies of any month

and the next 11 months (Future turnover)


Registration before effective date

Must register ≤

1�� 2015

1��2015

��2015

*Reasonable ground

that taxable supply will

exceed RM500K

1��2016

* May use historical turnover as basis for

future sales


Historical method

1/9/16 1/8/17 31/8/17

15/8/171/9/17 28/9/17

1/10/17

Preceding 11

months+

Current

month

Period to notify

Exceeded

threshold

Liable to

register

First day of

12 mths

period

Date of

registration

28 DAYS

Last day to notify and

apply for registration


Future method

1/8/16 1/9/16 28/9/16 31/7/17

Current month + next 11 months

Period to notify

Expected to

Exceeded

threshold

Date of

registration

28 DAYS

Last day to notify and

apply for registration

Liable to

register


Includes:

• Standard rated supply

• Zero rated supply ( includes goods exported)

• Deemed supply (private use of business assets, business gift > Rm500, disregarded supply(supplies between group members))

Excludes:

• Supplies of capital assets

• Exempt supplies

• Supplies of imported services




Category of person Taxable turnover

A company The value of all taxable supplies made by

that company

A company with division or branches The value of all taxable supplies from all

divisions and branches

A sole proprietor / an individual The value of all taxable supplies of his

business

A partnership The value of all taxable supplies by the

partnership

Notification of RegistrationEntity designated

person

ASSOCIATION AUTHORISED

PERSON

COMPANY DIRECTOR

PROPRIETORS

HIP

PROPRIETOR

PARTNERSHIP PARTNER

PROFFESIONA

L

PERSON

INDIVIDUAL PERSON

OVERSEAS CO DESIGNATED

PERSON OF

THE AGENT

www.gst.customs.gov.my

Who is not liable to register?

Any person---

– Making wholly exempt supply

– Making out of scope supply

– Making supply in designated area i.e. Langkawi,

Labuan, Tioman

– Making taxable supply below threshold


Registration of Taxable PersonAre carrying on a

business

Is your supply

taxable

Annual taxable

turnover exceed

threshold

You are required

to be registered

You may

registered

voluntarily

Do you intend

to make taxable

supply

You are not

required to be

registered

NO

NO

NO

NO

YES

YES

YES

YES

Notification of end of liability to be registered

• To notify within 30 days

• To continue to fulfill obligations until approved

effective date of cancellation:

– Charge GST

– Submit GST returns


Voluntary Registration

• Business below threshold

• Business which intends to make taxable supply

• Business establishment in malaysia but makes taxable supply outside Malaysia

Intention:

– Details of business arrangements

– Contract for establishment of premises

– Details of business purchases

– Other documentary evidence

Benefits:

– To recover input tax for start up costs

– To avoid giving the impression of small operation

• Registration may be cancelled if fail to make

any supply by the intended date

• Must remain registered for not less than 2

years.

Voluntary Registration

Exemption from Registration

• Person making wholly zero-rated supply is still liable to register if annual taxable turnover exceeds threshold

• DG may exempt the person from registration upon request

Rational:

To provide option of registration as compliance costs may outweigh benefit of ITC claims

Registration of sole proprietorship

Determination of liability to register

• To aggregate taxable turnover of all businesses

owned by the sole proprietor

• Registration to be in the name of the sole

proprietor

Registration of Partnership

• Registration of partnership business will be in the name of the firm

• Same partners can form separate partnership businesses

• Any change in partnership will not affect the registration

• A partner has to give written notification to DG if he has ceased to be member of a partnership

• Failure to do so, he is still liable for the partnership’s liability on any tax due and payable

Single taxable person

• Two or more business entities directed by DG to be registered as a single taxable person – One registration number

– Prior registration of any business to be revoked

• Artificial separation of business for the purpose of tax avoidance

• Determination of artificially separation of business– Financial link

– Economic link

– Organizational link

Group Registration

• Facility to allow related companies to register as a group

• Eligibility to be member of a group

– One company controls each of the other companies, individual or partnership controls all the companies

– One company can be a member of one group only

– Prior registration for individual company

– Make wholly taxable supply

How to determine control:

A company, individual, or partnership holds

– Directly

– Indirectly through subsidiaries or

– Together directly or indirectly through subsidiaries

More than 50% of the issued share capital of the second mentioned company

Group Registration (cont.)

Who is not eligible as member of a group?

• Individual

• Partnership

• Associate or affiliate company

Group Registration (cont.)

Example of group registration:

Companies JM, A, B and C are eligible to register as a group even though they carry out diversified business activities

Group Registration

JM Berhad (Management

Company)

Syarikat A Bhd (Hotel &

Restaurant)

Syarikat B Bhd (Oil & Gas)

Syarikat C Bhd (Plantation)

52%75%100%

Example of group registration

B is not eligible to be a group member with XYZ and A. However, B, C, D and E can register as a group.

Group Registration

XYZ BHD

B SDN BHD

C SDN BHD

D SDN BHD

E SDN BHD

A SDN BHD

40%80%

100% 55% 60%

Group Registration

Ali bin Abu

Syarikat A Sdn Bhd

Syarikat B Sdn Bhd

Syarikat C Sdn Bhd

Companies A, B and C can form a group for

GST registration purpose.

75%51%100%

Group Registration

A & B Enterprise (Partnership)

C SDN BHD D SDN BHD

Companies C and D can register as a group.

70%100%

Group Registration

XYZ BHD

A SDN BHD B SDN BHD

D SDN BHD

C SDN BHD

XYZ has direct control over A & B, and also

controls D indirectly through B.

40%52%80%

100%

• Nominate a member to be a representative member

• Registration of a group will be in the name of the representative member

• Representative member to consolidate return and pay tax for the group

• Application for registration to be made not less than 90 days before commencement of group operation

• Monthly taxable period n electronic user

• Benefit of group registration– Supplies between group members is disregarded

– Reduce GST compliance costs

– Reduce cash flow problem

Group Registration

Branch or Division Registration

• Business having branches or divisions may apply to register its branches or divisions separately

• Based on total taxable supplies of all branches and divisions

• Conditions:– The registered person and all branches or divisions are making

wholly taxable supplies

– The registered person is not a member of a GST group

– Difficulty in submitting a single return for all branches or divisions

– Each branch or division maintains separate account

– Each branch or division has separate business activities or in separate location, and

– Each branch or division has same taxable period

• Separately registered branch or division:

– Will have separate GST Registration No

– To issue its own tax invoice

– To submit separate return and payment of tax

• The registered person is still accountable for

GST liability of all branches and divisions

• Branch/division registered separately shall

remain registered for not less than 2 years


• DG may cancel the registration if:

– Failure to comply with any condition or

requirement imposed

– Failure to fulfill the conditions for branch/division

registration

– Provide false information in application

– Necessary for protection of revenue


Responsibilities of registered person

• Account for GST on taxable supplies made and received

• Submit GST return and pay tax by due date

• Issue tax invoice on taxable supplies made

• Inform within 30 days from date of business cessation

• Inform changes of address, taxable activity, accounting basis and taxable period

• Keep business records in BM or English for 7 years

Late registration

• Subject to late registration penalty on number of days late

• Late registration period is from the date he should have registered to the day before he is registered

• Effective date of registration for late registration is the date of application.

Late payment penalty rates

Example:Date exceeded threshold - 20 April 2017

Liable to notify - 1 May to 28 May 2017

Should have been registered - 1 June 2017

Apply for registration - 1 November 2018

Late registration period : 1 June 2017 to 31 Oct 2018

Number of days late : 152days

Late reg. penalty : RM9,000

Blocked Input Tax

Blocked Input Tax

Blocked Input Tax

�Passenger motor cars including hiring of car

�Family benefits

�Club subscription fee

�Medical and personal accident insurance

�Medical expenses

�Entertainment expenses for family members and potential clients

88

Blocked Input Tax

Entertainment expenses

89

Spouse or family

members

Potential clients

Employees

Existing Clients

No Yes

Tax invoice

Issuance of Tax invoice

• Tax invoice shall be issued:– By every registered person

– Who makes any taxable supply

– In the course or furtherance of any business

– In Malaysia

• Shall contain prescribed particulars as determined in GST Regulation 2014

• Commits an offence if registered person:– Fails to issue a tax invoice or

– Issue a tax invoice which does not contain any of the prescribed particulars.

Tax invoice

Issuance of Tax invoice

• Must be issued by a registered person and the

original copy to be retained by the customer

• Tax invoice can be issued to the customer

either hard copy or electronically

• Must be in Ringgit Malaysia (RM)

• Must be certified true copy if Tax invoice is

lost or misplaced

Tax invoice

Tax Exclusive

• Tax exclusive refers to the amount of GST paid as shown in the tax invoice with separate GST amountExample:

Assume you sell an oven at RM1050

GST 6% = price x rate of tax= RM1050 x 6%

= RM63

Charge customer RM 1050 + RM63(GST) = RM 1113 and remit RM63 to Customs.

Tax invoice

Tax inclusive

• In retail business, it may be more practical to treat the sum of money received from your customer (consideration) as inclusive of GST

• The tax invoice should still show the GST as a separate amount, and you can state the GST inclusive prices and indicate with the words ‘price inclusive of GST’

Example:

Assume you sell an oven at RM1113

GST 6% = price x rate of tax= RM 1113 x 6/106

= RM63

Charge customer RM 1113 and remit RM63 to Customs.

Tax invoiceTax fraction

• Tax fraction is the GST amount of the consideration

• The calculation of the tax fraction is as follows:

Tax fraction = ��

��×amount of consideration

• Example:

assuming your consideration is RM100

GST =��

��%��%× ��100

= �%

��%× ��100

= ��5.66

Tax invoice

Types of tax invoice

The issuance of tax invoice can be classified as

follows:

• Tax invoice

– Full Tax invoice

– Simplified Tax invoice

Tax invoice

Full Tax invoice

• A tax invoice which included all the prescribed particulars as mentioned in GST Regulations 2014

• A full tax invoice should have the following particulars:i. The words ‘Tax invoice’ in a prominent place

ii. The tax invoice serial number

iii. The date of issuance of the tax invoice

iv. The name, address and identification number of the supplier

v. The name (or trading name) and address of the customer

vi. A description sufficient to identify the goods or services supplied

Tax invoice

Particulars of a full tax invoice (cont.)vii. 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

viii. Any discount offered

ix. The total amount payable excluding tax, the tax rate and the total tax chargeable to be shown separately

x. The total amount payable inclusive of the total tax chargeable

xi. Any amount referred to in (i) and (j) must be expressed in Ringgit

Tax invoice

ABC Shoes Sdn Bhd

Syarikat BBB Sdn Bhd

ABC Shoes Sdn Bhd

Tax Invoice

Simplified Tax Invoice

• A tax invoice which exclude certain prescribed particulars in full tax invoice as approved by the Director General

• This type of invoice is used by retailers who normally generate large volume of invoices daily to end consumers e.g. supermarkets, motor workshop, petrol kiosks and other point of sales outlets

• Can be issued regardless of any value of sales

• Can take the form of an invoice, receipt, voucher or any other similar document, as long as it has all the particulars approved by the Director General.

Tax Invoice

Simplified Tax Invoice

• A taxable person is required to apply in writing to Director General if certain prescribed particulars are to be omitted in the tax invoice issued by him:– Form download from Portal GST

– Taxpayer Access Point (TAP)

• i.e. a registered person applied to the DG to allow him to exclude in his 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

• This simplified invoice may be allowed to be issued provided it contains particulars as approved by DG

Tax Invoice

AAA SDN BHD

Tax Invoice

Simplified Tax Invoice and input tax claim

• Simplified Tax Invoice can be used to claim any amount of input tax credit provided it contains the name and address of the recipient

• Simplified Tax Invoice which does not have the name and address of recipient:– Maximum of input tax to be claimed must not exceed

RM30

– If the amount of GST payable is more than RM30, the recipient can only claim input tax RM30

– Recipient must request to include his name and address in the simplified Tax Invoice to enable him to claim the full amount of input tax if GST payable is more than RM 30

Tax Invoice

Tax Invoice for mixed supplies

• A supplier may make exempt, zero rated and standard rated supplies simultaneously to the same customer

• Issues one invoice to document such transactions

• The tax invoice issued must clearly distinguish the taxability of the supplies ( exempt, zero rated or standard rated ) made

• Indicate separately the applicable values and the GST rate charged on each supply

Tax Invoice

Invoice in a foreign currency:

If the amount of the supply stated in a tax invoice is in foreign currency, the following particulars in the tax invoice have to be converted into Ringgit Malaysia (RM) for GST purpose:

a) The amount payable before GST

b) The total GST chargeable ; and

c) The total amount payable (including GST)

The foreign currency is converted into RM by using the open market rate of exchange prevailing in Malaysia at the time when the supply takes place

Tax Invoice

Tax Invoice

Tax Invoice

Tax Invoice and Supply Given Relief

• Minister may grant relief to any person or class or 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

• A taxable person shall be relieved from charging and collecting GST on taxable supplies made to such person or class of persons

• GST should not be charged

• 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 201X’

Tax Invoice

Tax Invoice

Tax invoice and Imported goodsThe recipient of imported goods does not hold a tax invoice for the imported goods. GST is paid at the time of importation based on the invoice from the overseas supplier using customs declaration forms ( Customs Form No.1 and 9). These declaration forms will be sufficient for the purpose of input tax claim by the importer or buyer

Tax invoice and Imported servicesThe recipient of imported services does not hold a tax invoice for the imported services. If the importer of the services is a registered person, the imported services is treated as a supply made by the recipient and he has to account for GST in the GST return covering the taxable periods in which the imported services were paid.

Credit and Debit Note

• Credit note is issued when the amount

previously invoiced is reduced or a transaction

is cancelled

• Debit note is issued when the amount

previously invoiced is increased for the same

supply


Credit Note (due to change in legislation)

• A change in the tax rate

• A change in the description

• A credit note shall be issued under the following situation:– A tax invoice in relation to the supply has been issued

– A return for the supply has been submitted to the DG

Taxable person shall

• Make an adjustment in the return for the taxable period where the change in rate or description takes place

• Supplier reduces output tax for the corresponding amount stated in the credit note

• Recipient reduces input tax

Example: standard rate to zero rated/

exempt tax charged on the supply is

incorrect


Credit Note( due to adjustment in the course of business)

• adjustment in the course of business:– When the goods invoiced as standard rated should have been

exempt or zero rated

– The supply of goods or services is cancelled

– Consideration for the goods have been partly or fully waived

– Quantity discount given after the goods have been supplied

– When sub standard goods are accepted by the customer at a reduced price

– Goods are returned or services are not accepted

– Goods and services are supplied for an unconfirmed consideration


Example – credit note’s adjustment

Goods sold on 20/7/15 by company A to B, amount RM1000(exclude GST at 6%). Goods returned on 10/8/15 to A, amount RM208. Credit note issued on 25/8/15 by A.

Company A(seller)

July 2015( return)

Output tax: RM1000 x 6% = RM60

Aug 2015 (adjustment in return)

Decrease output tax: RM208 x 6/106 = RM11.77

Company B ( Buyer)

Jul 2015 (return )

Input tax: RM1000 x 6% = RM60

Aug 2015 (adjustment in return)

Decrease input tax: RM208 x 6/106 = RM11.77

Output tax

input tax

*monthly taxable period

Adjust by

declaring the

related

output &

input in form

GST- 03


Debit Note (due to change in legislation)

• A change in the tax rate

• A change in the description

• A debit note shall be issued under the following situation:– A tax invoice in relation to the supply has been issued

– A return for the supply has been submitted to the DG

Taxable person shall

• Make an adjustment in the return for the taxable period where the change in rate or description takes place– Supplier increase output tax for the corresponding amount stated in

the credit note

– Recipient increase input tax

Example: zero rated/ exempt tax to

standard rate (charged on the supply

is incorrect)


Debit Note( due to adjustment in the course of business)

• adjustment in the course of business:

– When the goods invoiced as zero rated should have been standard rated

– Additional charges such as transportation cost imposed after delivery of goods

– When goods delivered to the customer are under priced

– Over supply of goods or services to the customer

– Goods and services are supplied for an unconfirmed consideration


Example – Debit note adjustment

On 20/10/15, ABC issued a tax invoice to BBB Co for RM10600 inclusive GST 6%

In Oct. taxable period for that particular transaction:– ABC accounts output tax of RM600 [i.e. RM10600 x 6/106]

– BBB Co claimed an input tax of RM600 [i.e. RM10600 x 6/106]

On 20/10/15, ABC raised a debt note for the amount of RM1060 inclusive GST 6%

In nov taxable period,– ABC has to make an adjustment by increasing the output tax by

RM60[i.e. RM1060 x 6/106]

– BBB Co has to make an adjustment by increasing the input tax by RM60 [i.e. RM1060 x 6/106]


A Credit and Debit Note shall contain the following particulars:

1. The words ‘credit note' or ‘debit note’ in a prominent place

2. The serial number and date of issue

3. The name, address, and GST identification number of the supplier

4. The name and address of the person to whom the goods or services are supplied

5. The reason for its issue

6. A description which identifies the supply of goods and services

7. The quantity and amount for each supply

8. The total amount excluding tax

9. The rate and amount of tax

10. The number and the date of the original tax invoice

Bad debt relief

• Bad debt relief: – Tax is already paid

– Whole or part of the consideration has been written off as bad debts

– Total payment or part payment not received 6 months from date of supply; and

– All reasonable efforts have been made to recover the debt

– Can claim bad debt relief up to 6 years from time of supply

Formula =

"�#$% &�%'%()%*+(,�%��%'&�-�./%�0��/#

1& �(*%��(& 2&��-�./%�0��/#× 3�-*0%� *��#�./%& ,%�-�./%�0��/#

Bad debt reliefBad debt relief:

Supply

Tax paid

Claimed

relief

6 months elapsed

6 years period for claiming bad

debt relief

Repayment of bad debt relief

• Repayment of bad debt relief should be made not later than

the last day of the subsequent month in which the repayment

was made

EG:

• Repayment formula :

(payment received x tax due on the supply) /consideration

• Needs to apportion the payment received to reflect the

consideration for taxable supply

January February March April May June

Received part payment

of debt

Last day to account

Payment of the

balance of debt

Last day to account


Example:

• AAA Sdn. Bhd. issued tax invoice to BBB Sdn. Bhd. for the supply of the followings:– standard rate supply: RM10,600 (tax inc.)

– zero rate supply: RM10,400

– Total: RM21,000

• When BBB failed to pay, AAA Sdn.Bhd. then claimed bad debt relief for the output tax which it has paid (i.e:RM600)

• Later, BBB paid RM10,000

• For repayment of bad debt relief AAA needs to properly attribute part of RM10,000 to the standard rated supply


Example (continued):

• Proportion of Standard rate supply to total consideration:

=10600

21000× 100% = 50.47%

• For RM10000 payment received the amount attributed to standard rated supply is RM5047

• The amount of repayment for bad debt relief is:

=��#$% �%'%()%* × �-*0%& ,%�0��/#

'& �(*%��(&

=5047 × 600

10600= ��285.68

Supply Spanning

What is supply spanning GST?

• Payment or invoice before 1.4.2015 and supply takes place on and after 1.4.2015 or vice versa– E.g. sales of goods, provision of services: e.g.. Airline

tickets & cinema

General rule

• Any supply before 1.4.2015 is not subject to GST

• Any supply on or after 1.4.2015 is subject to GST

• Claim input tax credits on acquisition and importation on or after 1.4.2015

Supply Spanning - Goods

• Goods supplies by sales tax licensee

Selling

stock

Selling

stock

Selling

stock

Selling

stock

1st April 2015

Invoice

Invoice

Goods delivered

Goods delivered

Goods delivered

Goods delivered

Contract Invoice

Invoice

payment

� Subject to sales

tax

� Subject to GST


tax


tax

Supply Spanning - Goods• Goods supplies by non sales tax licensee

• Goods not subject to sales tax

Selling

stock

Selling

stock

Selling

stock

1st April 2015

Invoice

Invoice

Goods delivered

Goods delivered

Goods delivered

Invoice

payment

� Subject to GST

� Subject to GST

� Subject to GST

Value of supply is

deemed inclusive of

GST

Supply Spanning - servicesPrescribed Service under Service Tax Act

STL GST1st April 2015

Contract

Contract

Invoice

issued

Invoice

issued

payment

Service

provided

Service

started

Service

provided

Service

started

Invoice

issued

Service

ended

Invoice

issued

payment

� Subject to Service

tax


tax


tax


tax

Supply Spanning - servicesNot Prescribed Service under Service Tax Act

GST

1st April 2015

Contract

Contract

Invoice

issued

Invoice

issued

Payment

(service

started)

Service

provided

Service

started

Service

provided

Service

ended

Invoice

issued

Service

ended

Invoice

issued

payment

� Subject to GST

(value of supply

inc.GST)

� Subject to GST

(proportional)

- periodic supply

� Not subject to GST

� Subject to GST

Supply Spanning - services

• Supply is subjected to GST– If payment received or invoice issued before

1.4.2015 (GST implementation date)1/4/2015

SST GST

Payment or invoice issued Service Performs

Deemed payment

received or invoice

issued on 1 April

2015

Subject to

GST

E.g..

• Ticket bought in 5.6.2014

• Travel for 12/8/2015

� Supplier account GST for April

2015 taxable period

� Recipient can claim input tax in

April 2015 taxable period

Supply Spanning - servicesScenario: Supply of service spanning 2 taxable periods

Internet service

subject 6% GST

Internet service

subject 6% GST

1.4.2015Contract for supply of

Jun 14 to May 15

Contract for supply of

internet service from

Jun 14 to May 15

invoice

Single invoice issued. For Jun 14 – May 15

E.g.: monthly charge RM100

• Total: RM1200

Value for Apr 15 & may 15 is deemed inclusive GST

6

106× 100 × 2 = ��11.32

Calculation of GST:6

106× 100 × 2 = ��11.32

Tax fraction

2 months: Apr

& May

April

taxable

period

May

taxable

period

• Account GST RM11.32

to Customs in April

taxable period

• Last day to account and

pay tax for April taxable

period is 31.5.2015

Supply Spanning - importation

Before 1/4/2015 On or after 1/4/2015 Implication on GST

Goods imported Release from customs

control

Subject to GST and date of

importation is when

released from customs

control

Services imported Payment made to overseas

supplier

Subject to GST and date of

supply is when payment

made

Payment made to overseas

supplier

Imported service

performed

Not subject to GST

Progressive Supply

What is progressive or periodic supply?

• Part of supply before effective date and part of supply on and after 1.4.2015,

• Supply is treated as uniform so that can be apportioned to pre and post GST components

• E.g. lease/ rental agreement, outsourcing/ franchise agreement, electricity, licensing

General rule

• Any supply before 1.4.2015 is not subject to GST

• Any supply on or after 1.4.2015 is subject to GST

• Work out GST on proportional time basic

Progressive supply : services

E.g.. Supply of service: payment in advance

Period

Supply

Tax

treatment

Pricing 16days

No service tax GST GST

Rental Rental

30days 30days

1 Apr 2015

RM1500 RM1500

Calculation of GST on supply

On proportional basis

Consideration:

30 days : RM1500

1 days: RM50

16 days: RM50 x 16 = RM800

GST for 1-16 Apr: RM800 x (6/106) = RM45.28

Non-reviewable contract

Non reviewable contract for GST purpose

• Written contract with no provision for general

review of the consideration for the supply

until a review opportunity arises

And

• Contract entered not less than 2 years before

the effective date (contract before 1st April

2013)

Non reviewable contract

A contract is considered as “non-reviewable” where-

a) The supply of goods or services is specifically identified in the contract;

b) The consideration (i.e. the price ) in monetary terms (whether by reference to a specific amount or by way of a formula) for the provision of goods and services is specified in the contract; and

c) The contract contains no provision for any change in the consideration arising from the imposition of GST or any general review of the consideration.

Non- reviewable contract

GST treatment

• Treated the supply as zero-rated supply if made before (whichever earlier)

– 5 years from 1.4.2015, or

– When a review opportunity arises

• Conditions:

– Both supplier and recipient are registered person;

– Supply is a taxable supply ; and

– The recipient is making wholly taxable supply


≥2 years from ED

1.4.2015

SST GST

Contract

ends

Review opportunity or 5

years, whichever earlier

Non-reviewable contracts

Contract

A

Contract

B

Contract

C

No supply

Supply will

start 1/4/2015

Zero rated

Zero rated

Standard rated

Standard rated

Standard rated

No GST

No GST

Non-reviewable contract EXAMPLE: scenario 1 – Recipient becomes a registered person

Contract


made not less than 2 years

before ED RPNRP

Standard rated Zero rated

Recipient became registered

person

Review opportunity or 5 years,

whichever earlier

1st April 2015

ED

Non registered person

Non-reviewable contract EXAMPLE: scenario 2 – Recipient becomes a registered person

Contract



before ED

RP

RP NRP

Standard ratedZero rated

Recipient ceased to be registered

person


whichever earlier

1st April 2015

ED

Registered person


EXAMPLE: scenario 3 – Changes in recipient status

Contract



before EDRP RP

Standard ratedZero rated

Change in status


whichever earlier

1st April 2015

ED

Wholly taxable to mixed supplier

Standard rated Zero rated

Mixed supplier to wholly taxable

Warranty inclusive in price

• lf warranty is included in the price of the goods, the coverage that spans 1.4.2015 will not be subject to GST.

• The replacement parts or services during that period will not be subject to GST.

• Extended period will be subject to GST but again the replacement parts will not be subject to GST.

• FOC parts supplied during warranty not subject to GST if selling price include after-sales service ,repairs and FOC replacement parts.

• Services and replacement of parts FOC not subject to GST.

Supply under warranty• Scenario 1: warranty included in the price and purchased

extended warranty before 1.4.2015

Warranty begins

1/1/2015

Warranty expire

31/12/2015

Extended

Warranty

Expire

31/12/2016

Replace of

goods/services

Replace of

goods/services

No GST No GSTGoods purchased

Purchase extended

warranty

No GST

1/4/2015Extended warranty

Supply under warranty• Scenario 2: Extended warranty purchase after effective

date

Warranty begins

1/1/2015

Warranty expire

31/12/2015

Expire

31/12/2016

Replace of

goods/services

Replace of

goods/services

No GST No GSTGoods purchased

Purchase

extended

warranty

1/4/2015Extended warranty6% GST

Construction agreement

GST treatment

• Charge GST on value of supply that exceeds the value as determined at 1.4.2015

• Value determine at 1.4.2015:

– Value of work done and material permanently incorporated in accordance with written agreement

– Valuation by authorized person on or before the end of supplier first taxable period

– Certificate signed by authorized person– E.g.. Architect, civil engineer or quantity surveyor

Construction agreement

• GST is due and payable on the value of supply that exceeds the value of works & material incorporated in the construction site as in agreement

Value of works & material incorporated Works to be done

Value of supply

Construction

agreement

1/1/2014

Certification by

authorized person

1/4/2015

Works completed

31/12/2015

Subject to GSTE.g..

• On 1.4.2015, architect certify:

• Value of works & material =

RM4000000

• Value of supply by contractor = RM4250000

• GST is due and payable on RM250000

Construction agreement GST treatment on Construction agreements

• Charge GST on value that exceeds value as determined at 1st April 2015


Construction

agreement

1/1/2015

Certification by

authorized person

1/4/2015

Works completed

31/12/2015

Subject to GST

Scenario 1:

If value of work done at 1st April

2015 is RM 400000; then for the

6th payment, out of RM37500,

GST is charged at RM12500. 7th

installment onward will subject

to GST.

Amount paid to contractor = RM 3750005th installment

paymentValue of supply

RM 7500006 Upon completion of brickworks, walls and partition of ground floor 5 37500

7 Upon completion of brickworks, walls and partition of first floor 5 37500

8 Upon completion of roofing of the building 5 37500

9 Upon completion of electrical conduits and plumbing 5 37500

10 Upon completion of internal and external plastering 10 75000

11 Upon completion of internal and external installation and painting, doors and

windows

10 75000

12 Upon completion of connection of utilities 5 37500

13 On the date the purchase taken vacant possession of the building and to be held

by vendor solicitor as stakeholder for payment to vendor

5

14 2.5% 6 months after taken vacant possession 18750

2.5% after the expiry of 18months after the date of taken vacant possession 18750

100 750000

Construction agreement GST treatment on Construction agreements

• GST charge on proportion


Construction

agreement

1/1/2015 1/4/2015Works completed

31/12/2015GST

Scenario 3:

If certification by authorized person is done after the 1st taxable period of the supplier,

then the proportion of supply on 1.4.2015 onward is subjected to GST.

EG.

Total value of supply = RM750000

Value per month = RM7500000/12 = RM62500

Value subject to GST = RM62500 x 9 = RM500000

Amount paid to contractor = RM 3750005th installment

paymentValue of supply

RM 750000

1/8/2015

Certification by

authorized person

Retention payment

Retention payment

• Any payment that relates to:– Supplies made before 1.4.2015 is not subject to GST

– Supplies made on or after 1.4.2015 is subject to GST

100% completion

retain 10% for 6

months, RM30000

Rectification work

RM7500

Rectification work

RM11000

(6% GST) Balance payment

RM11500

( NO GST)

1/2/2015

15/3/2015 15/7/20151/4/2015 1/8/15

Hire purchase transaction

Hire purchase transaction

• HP/ Financial lease is a supply of goods and a

supply of credit.

• Goods supplied before 1.4.2015 not subject to

GST although installments √ made spanning 1st April 2015

√ Instalments begin a_er 1st April 2015

• Same treatment applies to financial lease

Unredeemed voucher

Unredeemed vouchers

• Supplies subject to GST if – Voucher is issued before 1.4.2015; and

– Goods or services made on or after 1.4.2015 on redemption of voucher

• GST treatment – Tax chargeable*

1/4/2015

Purchase

voucher

Redeemed

voucher

*Not subject to GST if the sale

tax/service tax was charged

Removal from machine

Supplies from machines operated by bank notes

/coins, token or the like

• 1st removal within 7 days from 1st April 2015

not subject to GST

• 2nd and subsequent removal within 7 days

from 1st April 2015 subject to GST

• From 8th April 2015 onwards , any removal

subject to GST

Removal from machine GST treatment on money / token removal from machine

removal

1.4

.20

15

8.4

.20

15

Supply of

Goods

eg vending

machine

Service eg

public massage

chair

Face value

voucher

vending

machine

1st $$$

(NO GST)

1st $$$

(NO GST)

1st $$$

� (GST)

2nd $$$

� (GST)

2nd $$$

(NO GST)

Special refund

Entitle to special refund of sales tax (full refund) if:

• Claimant is a registered (mandatory) person on 1.4.2015

• Hold goods on 1.4.2015 for making taxable supply

• Goods are sales taxable goods

• Goods where sales tax was paid before 1.4.2015

• Holds relevant invoices, import document to show sales tax has been charged

• Holds payment documents (cheque, payment voucher, etc.) to show sales tax has been paid

Special refund

Reduced special refund to 20%

(20% method)

• Purchase goods from non sales tax licensed manufacturers

• Goods are sales taxable goods

• Holds invoices which does not show sales tax has been charged

• Claimant is a registered (mandatory) person

• Holds goods on effective date for making taxable goods

• Reduce the actual purchase price by 80% for goods held on hand on 1.4.2015

Special refund

20% method

• Reduce the actual purchase price by 80% for

goods held on hand on 1.4.2015

Special refund = actual price x 20% x sales tax rate

Example :

Purchase RM15,000 of raw materials but holds

RM10,000 on 1.4.2015

Special refund = RM10,000 x 20% x 10% = RM200

Special refundFull Refund of ST 20% refund of ST

Who is entitled Registered Person (mandatory)

When to claim Within 6 months starting 1st April 2015

Type of goods 1.Taxable goods under Sales Tax

2.Goods for making taxable supply under GST

Existence of goods Hold goods on 1st April 2015

calculation Actual price X ST rate Actual price X 20% X ST

rate

ST liability on goods Has paid sale tax

Has paid to ST Licensee

Has made payment to

supplier

Documentary proof Import declaration ,sale tax

invoice , proof of payment

Invoice , proof of payment

Audit requirement Refund ≤ RM10 K – audit certificate by chartered

accountant

Refund ≥ RM10 K – certified by approved company

auditor

Special refund

Goods not eligible for special refund

• Goods have been capitalized

• Goods used partially or incorporated into other

goods e.g. raw materials, work in progress

• Goods for hire e.g. cars, generators

• Goods not for business e.g. personal use

• Goods not for sale or exchange e.g. containers ,

pellets, stationaries , moulds, manufacturing aids

Special refund

Manner to claim special refund

a) Make one claim within 6 months from

1.4.2015 without corrections allowed

b) Use special form to claim refund (manual or

online ) which includes either:i. For special refund ≤ RM10,000 require audit

certificate signed by a chartered accountant; or

ii. For special refund ≥ RM10,000 require audit

certificate signed by an approved company auditor

Q & A SESSION