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GOODS & SERVICES TAX (GST) MALAYSIA

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GOODS & SERVICES TAX (GST) MALAYSIA

OVERVIEW

• Latest GST Developments

• The Basics of GST

• Registration : Liability to register, when to register and how

• GST Impact and Considerations

• Actions To Be Taken

• GST

2014 Budget Announcement:

1) GST shall replace the current Sales and Service Tax effective 1 April 2015

2) GST shall be charged and levied on any supply of goods and services made in

Malaysia and any importation of goods into Malaysia

3) GST will NOT be imposed on basic food items, piped water supply,

transportation services, first 200 units of electricity, health, education,

sales/purchase/rental of residential properties and services provided by

government etc.

4) Proposed GST standard rate is 6%.

5) Threshold for registration is annual taxable turnover exceeding RM500,000

LATEST GST DEVELOPMENTS

Page 3

2014 Budget Announcement (con’t):

6) Further deduction to be given for expenses incurred on training in

accounting and ICT for GST in respect of years of assessment (YAs) 2014 and

2015.

7) Training grant of RM 100 millions will be provided to businesses who send

their employees for GST courses for YAs 2014 and 2015.

8) Financial assistance amounting to RM 150 millions is provided to SMEs for

purchase of accounting software.

LATEST GST DEVELOPMENTS

Page 4

Sunday, November 24, 2013

Page 5

Scope of GST

GST is imposed on

• Supply of goods and services in the country

• Import of goods into the country

• Import of services (reverse charge

mechanism)

Supply:

• Takes the form of tangible goods and

intangible services e.g. grants, assignment;

• Anything that is not a supply of goods will be

treated as a supply of services.

GST

Import of Goods

-physical

movement of goods

into Malaysia

Import of Services

- reverse charge

Supply of

Goods or Services

in Malaysia

- belonging concept

i.e. where the

supplier is located

Sunday, November 24, 2013

Page 6

Scope of GST (cont’d)

Charging and Collection of GST

Importation of Goods into

Malaysia

GST is collected by

the supplier who is

registered with Customs

GST is

charged on

Supply of Goods or Services in

Malaysia

Goods or Services

supplied by local supplier

GST is collected by Customs

at the point of importation

THE BASICS OF GST

Page 7

Attribute Sales and Services Tax (SST) Goods and Services Tax (GST)

Scope

• Manufactured in Malaysia, or acquired

under the provisions in Sales Tax Act

• Imported into Malaysia by any person for

home consumption

• Categories of taxable person in certain

groups (e.g. hotels, restaurants, private

hospitals etc.)

• Any supply of goods and services

made in Malaysia, including

anything treated as a supply under

the GST Act; and

• Any importation of goods into

Malaysia

Stage • Single stage • Multi-stage

Threshold

• Sales Tax- annual sales turnover

exceeding RM 100,000

• Service Tax -various annual sales

turnover thresholds (RM100,000, RM

300,000, RM 3 million)

• RM 500,000 of annual taxable

turnover

Rates

• Sales Tax (5%, 10% and at a specific

rate)

• Service Tax is at 6%

• Proposed GST rate is at 6%

THE BASICS OF GST Differences between Sales/Services Tax and GST

Page 8

Types of Supply

Categories of Supply Examples of Supply

Standard Rated

(Taxable Supply)

Local supply of goods / services, supply of land and building for

commercial, administration or industrial purpose, construction of all

types of building

Zero Rated

(Taxable Supply)

Export sales / international services / basic foodstuff / agricultural

supplies

Exempt

(No GST)

Transport services, toll/highway, certain financial services / sales &

lease of residential land / property / agricultural land / private

health & education

Out of Scope

(No GST)

Transfer of business as going concern or sales of property outside

Malaysia, charges and fees imposed by the Government

• Businesses providing exempt supply will not be entitled to claim the input GST incurred.

THE BASICS OF GST

Page 9

THE BASICS OF GST

The Basic GST Process

Refundable

by Customs

Net GST

Payable

to Customs

Less Input Tax

Output Tax < Input Tax

(Negative)

Equals

GST collected

from customers

GST paid on

business purchases

Output Tax

Output Tax > Input Tax

(Positive)

Price = RM300

GST = RM18

Price = RM100

GST = RM6

Tax remitted

to Customs

RM18

RM6

RM12

Price = RM100

GST = RM6

Price = RM150

GST = RM9

Tax remitted

to Customs

RM6

RM9

-RM3

Page 10

Payment to Customs

Supplier

Sale Price = RM530 (inclusive of GST)

Sales Price (Before GST)

Wholesaler

Sale Price = RM1,590 (inclusive of GST)

Consumer

Payment to Wholesaler= RM1,590

Price = RM1,000

Proposed GST rate = 6%

By Consumer

GST paid = 90

Manufacturer

Sale Price = RM1,060 (inclusive of GST)

Price = RM500

Price = RM1,500 By Wholesaler

GST collected 90

Less: GST paid 60

GST payable 30

By Supplier

GST collected 30

Less: GST paid 0

GST payable 30

By Manufacturer

GST collected 60

Less: GST paid 30

GST payable 30

THE BASICS OF GST

Page 11

REGISTRATION : LIABILITY TO

REGISTER, WHEN TO REGISTER AND

HOW

Page 12

WHO IS LIABLE?

Taxable person [Clause 2 of GST Bill]

any person who is or is liable to be registered under this Act;

Person include individuals, sole proprietors, partnerships, corporations, clubs, associations, societies, trusts and other unincorporated bodies, Federal and State government bodies and local authorities AND

Business [Clause 3 of GST Bill]

Includes any trade, commerce, profession, vocation or any other similar activity, whether or not it is for a pecuniary profit

Includes activities of clubs, associations and societies

Page 13

Sunday, November 24, 2013

Page 14

GST Registration – Who is required to register?

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

• Registration is mandatory for businesses whose turnover has exceeded the prescribed threshold of

RM500,000

• Calculation of threshold is based on the total value of taxable supplies for a 12 month period

• Liability to register is determined by

- Historical turnover (based on turnover of current month and the preceding 11 months) OR

- Future turnover (based on turnover of current month and the next 11 months)

• To apply for registration within 28 days from end of the relevant month

• Effective date of registration will be on the first day of the following month

• Registered person will be given a unique identification number

• Pre-registration exercise expected to begin 6 months before GST implementation date

* Please note that penalties of RM50,000 and/or up to 3 years imprisonment will be imposed for

non compliance.

GST REGISTRATION – FORMS OF REGISTRATION

Forms Explanation

Voluntary Registration

[Clause 24]

• Business below threshold (RM500,000) may apply for voluntary registration

• Once registered shall remain to be registered for at least 2 years

Group Registration

[Clause 27]

• Facility to allow related companies to account GST in group

• Each company: must be registered individually prior to group registration

must make wholly taxable supplies

• Nominate a member to be a representative member

• Taxable supply between members being disregarded

• Representative member is responsible for completing & rendering the single

return on behalf of the group

• All members are jointly & severally liable for any tax due & payable by the

representative member

Control : Either directly or indirectly holding > 50% of the issued share capital of

the other company (Incudes Individual and partnership)

Page 15

GST Registration • GST registration is essential for the purposes of

submission of GST return, payments, correspondence

etc

• Upon fulfilling GST requirements, the co would have to

make an application for GST using prescribed form GST

– 01

• Customs office will issue letter of approval together

with the registration no to the applicant

Page 16

ACCOUNTING FOR GST – REGISTRATION

Group GST Registration • GST registration is a facility that allows two or more

related companies to register as a group

• Group registration may be relevant to the group

considering the substantial number of subsidiaries

under its control;

• The group would have to make the application using

prescribed form GST – 02

Page 17

ACCOUNTING FOR GST – REGISTRATION

Registration for Joint Ventures • Registration for joint venture for GST purpose only

applies to petroleum upstream activity under the

Production Sharing Contract (PSC).

• This may be relevant for certain JVs assuming that

there are existing and/or future projects under a Joint

Venture commitment/scheme.

• JVs would have to make the application using

prescribed form GST – 02 and GST – 02A.

Page 18

ACCOUNTING FOR GST – REGISTRATION

GST Return • GST return is a statement used to account for the tax

to the Customs Dept

• The form is essential to enable any input tax to be

claimed from Customs Dept.

• The GST return is required to be furnished to the

Director General not later than the last day of the

month following the end of taxable period

• Cos would have to make an application for GST using

prescribed form GST – 03

Page 19

ACCOUNTING FOR GST – FILING OF RETURNS

ACCOUNTING FOR GST – FILING OF RETURNS Submission of Tax Return

• A registrant needs to account for GST charged and GST paid

on the taxable supplies made by him in each taxable period

• A registrant is allowed to set off input tax paid on his purchases against GST charged on his taxable supplies

• GST returns and payments must be submitted not later than the last day of the month following the end of the taxable period (Annual sales >RM5 mil –monthly, <RM5 mil –quarterly)

• Electronic filing is encouraged

• Late filing: Penalty at 5% (within 30 days), additional 5% (31 to 60 days) and 3% for every 30 days thereafter up to a maximum of 25%

• Incorrect return: Penalty of RM50,000 and/or up to 3 years imprisonment

• Liability to Keep Records: All business and accounting records relating to GST are to be kept in Bahasa Malaysia or English for a period of 7 years

Page 20

WHO IS LIABLE? [Clause 103]

• The following shall be deemed to be guilty of a GST

offence:-

…director, partner, manager, secretary or other similar officer of the company, firm, society, association or other body of persons…

• unless, he proves -

a) that the offence was committed without his knowledge, consent or connivance; and

b) that he took all reasonable precautions and had exercised due diligence to prevent the commission of the offence.

Page 21

GST IMPACT AND CONSIDERATIONS

Page 22

Sunday, November 24, 2013

Page 23

GST impacts ALL aspect of BUSINESS

GST

Finance & Administration

Purchasing & Procurement

Information Technology

Quality Assurance & Production

Human Resource

Legal, Compliance

& Governance

Sales & Marketing

Sunday, November 24, 2013

Page 24

Construction & Engineering

Some examples of Divisions:

Sales & marketing

Admin

Accounts & Finance

Legal Department

- procurement, suppliers

- sales and marketing, after-sales service,

- admin, HR, training, employee claims, benefits

- account payable & receivable, treasury, management

reporting, capital expense, taxation, budget

- long term contracts, warranty and etc.

•Identification and classification of work streams by inputs and outputs

GST Considerations

Sunday, November 24, 2013

Page 25

GST Considerations – Common GST Issues

Managing Transitional Issues (agreements executed before but straddle past 1 April 2015)

(stock in trade acquired before 1 April 2015)

GST Treatment?

Accounting System • Modification to existing accounting system to be

GST ready?

Provision of mixed supplies •Apportionment of input tax?

Bad Debts • GST treatment?

Discount • GST treatment?

Invoice & Record keeping •Existing vs new sets of documents?

Supply – taxable, place, time, value?

Sunday, November 24, 2013

Page 26

GST Considerations –Input / Output Taxes

Claim/charge of input/output taxes

[local and overseas suppliers]

Discounts “Gift Rule”

JV Agreements • To be reviewed – during the transition period?

Long Term Contract To be reviewed – during the transition period?

Stock •Consignment?

Hire Purchase/

Leasing • GST treatment?

Approved Trading Schemes •What is available?

ACTIONS TO BE TAKEN

Page 27

ACTIONS TO BE TAKEN

• Suggested actions be taken:

• People

Establish a GST implementation Team from the sales and marketing, purchasing /

procurement, legal and compliance, finance / taxation, IT, HR etc.

Conduct internal GST training

• Technology

Review all IT systems

– Adequate collation capability for GST reporting and inventory management

– Relevant fields are available in ERP system (e.g. GST category for input and output, time

of supply, monthly GST return etc.)

– Able to cope with peculiarities in business transactions (e.g. consignment stock,

discounts, etc.)

Page 28

ACTIONS TO BE TAKEN (con’t)

• Process

Review internal processes

– Record keeping (eliminate manual processes, tax invoice format etc.)

• Documentation

Contract review, vendor/supplier review, accounting entry and cash flow management

Page 29

TYPICAL BDO GST IMPLEMENTATION PLAN

PRE – PROJECT

PLANNING STAGE 1 STAGE 2 STAGE 3

Start Dec 2013

(2 weeks)

Dec 2013- Jan 2014

(2 months)

Feb 2014 – May 2014

(4 months)

June 2014 – Oct 2014

(5 months)

Agree detailed project

plan which best fit

into the company’s

business model and

timetable for

implementation

Request for

information

Preliminary interview

and use of

questionnaires

Analysis of documents,

diagnosis, further

verification and

clarification

Gap analysis

High level report

Data verification and

gap analysis (based on

final GST legislation)

Mapping exercise

GST Help desk

GST Implementation

advisory strategy

report

Implementation

Registration

Policies & procedures

Proposed trial/parallel

run

Assist with registration

and guidance on the

completion of forms

(review of first 3 GST

returns)

Training

Pre – project

planning Stage 1

Impact Study

Stage 2

Mapping

Exercise,

Data

Verification

Stage 3

Implementation

Page 30

Sunday, November 24, 2013

Page 31

IMPLEMENTATION OPTIONS

• Full project management

• Active involvement and joint partnership in implementing GST

• Regular monitor of implementation progress as a subject matter expert

• Ad hoc assistance as and when required

Please contact David Lai

at 03-2616 2978 or [email protected]

for further information or assistance.