Customs GST Seminar

GST Framework and

Registration
GST UNIT
ROYAL MALAYSIAN CUSTOMS
DEPARTMENT
Briefing Agenda
1. Why GST?
2. What is GST?
3. Proposed GST Model
4. Registration for GST
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3
1
Why GST?
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Why GST?
Part of the
governments tax
reform programme
Weaknesses of sales
tax and service tax
Make the taxation
system more
effective, efficient,
business friendly,
transparent and
capable of generating
a more stable source
of revenue
5
WHY GST?
Part of the governments tax reform programme
Weaknesses of sales tax and service tax
Make the taxation system more effective, efficient, business
friendly, transparent and capable of generating a more stable
source of revenue
effective
self policing
in-build cross checking features
able to address inherent weaknesses of the current sales
tax and service tax
efficient
less bureaucracy
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WHY GST?
business friendly
availability of various schemes
reduce business cost
transparent
GST will be shown on the invoice
public ruling
capable of generating a more stable source of revenue
not susceptible to economy downturn (unlike income
tax),
reduce reliance on direct taxes
depleting resource (petroleum)
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Why GST?
Part of the overall government tax reform
Inherent weaknesses in the sales tax and service tax (SST)
system
cascading effect and double taxation
tax embedded in goods exported
transfer pricing
tax bureaucracy (CJ5, CJ5A, CJ5B, CJ(P)2, invoice
inclusive tax)
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Why GST?
Hidden/shadow sectors/industries may be encouraged to be
in the GST system
GST on input is claimable
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Service tax at 6%
Consumer
Charge : RM30,000
6% service tax : RM1,800
Charge : RM 6,000
6% service tax: RM360
Total tax paid = RM2,220
(RM1,800 +RM360+RM60)
Charge : RM1,000
6% service tax: RM60
Lawyer
services
Telecommunication
services
Professional
engineer
Consumer paid
= RM31,800
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SST Cascading effect in the same tax regime
GST at 6%
Consumer
Charge : RM29,580 (RM30,000 RM420)
6% GST : RM1,774.80
Charge : RM 6,000
GST 6% : RM360
Total tax paid
= RM1,774.80
Charge : RM1,000
GST 6% : RM60
Saving = RM445.20
(RM31,800-RM31,354.80)
Lawyer
services
Telecommunication
sevices
Professional
services
Consumer paid
= RM31,354.80
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GST eliminate cascading effect in the same tax regime
Product : biscuit
Sales tax at 5% dan services tax at 6%
Factory price : RM4.00
Sales tax 5% = RM0.20
Consumer paid = RM7.63
(RM7.20 + RM0.43)
Purchase price : RM4.20
Hotel selling price : RM7.20
(RM4.20 + RM3.00)
Services tax 6% = RM0.43
Sales tax of RM0.20
paid by the hotel is
embedded in the
selling price
Actual total tax paid
=RM0.63
(RM0.20+RM0.43)
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SST Double taxation due to multiple tax
Product : biscuit
GST at 6 %
Factory price : RM4.00
GST 6% = RM0.24
Purchase price : RM4.24
Hotel selling price : RM7.00
(RM4.00 + RM3.00)
GST 6% = RM0.42
GST of RM0.24
NOT embedded in
the selling price
Actual total tax
paid =RM0.42
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GST eliminated double taxation due to multiple tax
Consumer paid : RM7.42
(RM7.00 + RM0.42)
Total of GST paid : RM0.42
Saving to consumer = RM0.21
Why GST?
250
200
150
Need to reduce
reliance on direct tax
0.7% 200
0.6% 180
25.8%
160
0.6% 0.7% 0.8% 29.0%
140
0.5%
Need to reduce reliance
on petroleum revenue
185.42
159.79 158.64 159.65
139.89
100
50
4.8%
0.7%
0.6% 29.1%
23.6%
20.3%
25.4% 1.0%
22.8%
29.1%
49.8%
28.7%
31.4%
19.2%
18.4%
51.4%
49.6%
32.0%
17.7%
49.6%
30.6% 17.2%
17.8%
19.1%
56.4%
52.6%
49.5%
123.55
120
106.30
100
80
61.86
60
40
29.52
23.5% 50.4%
36.7% 47.1%
35.2%
0
1990 2000 2005 2006
Direct tax Indirect tax
2007 2008 2009 2010 2011 2012
Non-tax revenue Non-revenue receipts
20
0
1990 2000 2005 2006
Total revenue
2007 2008 2009 2010 2011 2012
Petroleum revenue
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160 countries implementing GST/VAT
EUROPE
CARIBBEAN, CENTRAL &
NORTH AMERICA
No. of countries = 19
Highest tax rate = 17.5%
Lowest tax rate = 5%
SOUTH AMERICA
No. of countries = 11
Highest tax rate = 22%
Lowest tax rate = 10%
No. of countries = 53
Highest tax rate = 27%
Lowest tax rate = 5%
AFRICA
No. of countries = 44
Highest tax rate = 20%
Lowest tax rate = 5%
ASIA
No. of countries = 19
Highest tax rate = 20%
Lowest tax rate = 5%
ASEAN
No. of countries = 7
Highest tax rate = 12%
Lowest tax rate = 7%
OCEANIA
No. of countries = 7
Highest tax rate = 15%
Lowest tax rate = 5%
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Why GST?
Countries Malaysia Singapore Thailand Indonesia Vietnam Philippines Cambodia Laos
Corporate tax
Tax rate 25% 17% 23% 25% 25% 30% 20% 28%
Individual tax
Highest
marginal rate
26% 20% 37% 30% 35% 32% 20% 24%
Highest
income band
SGD320,000
RM100,000 (approx.
RM760k)
BHT4 mil Rp500 mil VND960 mil
(approx. (approx. (approx.
RM390k) RM170k) RM140k)
PHP500,000
(approx. RM35k)
KHR150 mil
(approx.
RM115k)
LAK40 mil
(approx. RM16k)
VAT / GST
10%
Tax rate 6%
(reduced to 7%
7%
from 1/10/2010
to 30/9/2014)
10% 10% 12% 10% 10%
Year
implement
2015 1993 1992 1984 1999 1998 1999 2009
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2
What is GST?
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What is GST?
Basic principles of GST
A consumption tax in the form of value added tax
each stage of business transaction up to the retail stage of
distribution
Also known as Value Added Tax (VAT)
GST incurred on inputs is allowed as a credit to the registrant
offset against output tax
INPUT
Raw materials, rents,
electricity, furniture,
professional services etc.
GST on inputs
Business
Claimed
input tax
OUTPUT
Goods
Services
GST on outputs
= Input tax
= Output tax
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What is GST?
Types of supply Output tax Input tax
Standard-rated 6% Claimable
Zero-rated 0% Claimable
Exempted No GST Not claimable
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How GST Works? Standard-Rated
Manufacturer
Manufacturer
claims back
GST
Wholesaler
Wholesaler
claims back
GST
Retailer Consumer
Retailer
claims back Consumer
GST pays
6%
GST only
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GST AT 6%
How GST Works? Standard-Rated
Delivery /
supply chain
Manufacturer Wholesaler
Value-
Added
Purchase cost : RM100 Activity
GST* : RM6
Purchase price : RM106 Added Value : RM25
*Note: claim input tax (Add GST : RM1.50)
Retailer Consumer
Selling price : RM125
GST : RM7.50
Total selling price : RM132.50
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GST Mechanism (Standard Rate)
Tax computation on STANDARD RATED SUPPLY
1.80 4.20 6.00 100.00 Retailer
3.00
0.60
0
Tax on
Input
(RM)
70.00
50.00
10.00
Sales
(RM)
6.00 GST collected by the Government
1.20 4.20 Wholesaler
2.40 3.00
Manufacturer
0.60 0.60 Supplier
Net Tax
Paid
(RM)
Tax on
Output
(RM)
Business
Entity
GST rate at 6%
Final consumer pays RM106.00
How GST Works? Zero-Rated
Manufacturer
Manufacturer
claims back
GST
Wholesaler
Wholesaler
claims back
GST
Retailer Consumer
Retailer
claims back
GST does not
pay any
GST
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GST AT 0%
Consumer
How GST Works? Zero-Rated
Delivery /
supply chain
Manufacturer Wholesaler
Value-
Added
Purchase cost : RM100 Activity
GST* : RM0
Purchase price : RM100 Added Value : RM25
*Note: claim input tax
Retailer Consumer
Selling price : RM125
GST : RM0
Total selling price : RM125
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GST Mechanism (Zero Rate)
Tax computation on ZERO RATED SUPPLY
e.g. Sugar
0 0 0 125.00 Retailer
0
6.00
0
Tax on
Input
(RM)
120.00
115.00
100.00
Sales
(RM)
0 GST collected by the Government
0 0 Wholesaler
-6.00 0 Manufacturer
6.00 6.00
Sugar cane
supplier
Net Tax
Paid
(RM)
Tax on
Output
(RM)
Business
Entity
GST rate at 0%
Final consumer pays RM125.00
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How GST Works? Exempted
Supplier
Supplier claims
tax paid on
input
Private
hospital
Private hospital
cannot claim
tax paid on
input
Consumer
Consumer
does not
pay any
GST
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GST AT 6% NO GST
How GST Works? Exempted
Delivery /
supply chain
Manufacturer Wholesaler
Value-
Added
Purchase cost : RM100 Activity
GST* : RM6
Purchase price : RM106
Retailer Consumer
Selling price : RM131
GST : RM0
Total selling price : RM131
Added Value : RM25
*Note: cannot claim
input tax
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GST Mechanism (Exempt)
Tax computation on EXEMPT SUPPLY
e.g. Supply of Medical Aid by Private Hospital
0 4.20 0 100.00 Hospital
3.00
2.40
0*
Tax on
Input
(RM)
70.00
50.00
40.00
Sales
(RM)
4.20 Total GST collected by the Government
1.20 4.20 Supplier
0.60 3.00 Wholesaler
2.40 2.40 Manufacturer
Net Tax
Paid
(RM)
Tax on
Output
(RM)
Business
Entity
GST rate at 6% * Cannot claim input tax
Final consumer pays RM104.20
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3
Proposed
GST Model
Proposed GST Model
To replace current tax system
Sales Tax &
Service Tax (SST)
5%, 6%, 10% & specific rate
Various threshold
Goods and Services
Tax (GST)
Rate = ?%
Threshold = RM500,000
GST is charged on goods and services that are
supplied in Malaysia
imports
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Proposed GST Model (Zero-rate Supply)
0%
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Agriculture products paddy
& fresh vegetables
Foodstuff rice, sugar, table
salt, plain flour, cooking oil
Livestock supplies meat,
muttons, swine
Poultry & eggs
Fish, prawn, cuttlefish, crabs,
oyster, cockles, etc.
Supply of the first 200 units of
electricity to domestic users
Supply of the first 35m
3
of
water to domestic users
Exported goods and services
Public Transportation - Rail, Bus, Taxi and Ferry
Land for residential, agriculture and general use
Funeral in a package Private health & education
Highway toll
Accommodation (28 days)
Financial services
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Proposed GST Model (Exempt Supply)
GST
Proposed GST Model (Supply by Government)
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Proposed GST Model (Special Schemes)
To provide cash flow relief to businesses
Approved Trader Scheme
facility given to major exporters where GST on imports is suspended
Approved Toll Manufacturer Scheme
facility given to local toll manufacturer to disregard tax on value added
charges to overseas client
Approved Jewellers Scheme
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 account GST on the margin
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Proposed GST Model (Special Schemes)
To provide cash flow relief to businesses
Warehousing Scheme
GST suspended in public and private warehouse
Group registration
supply within the group will be disregarded
To promote tourism
Tourist Refund Scheme
tourists allowed to claim GST paid on purchases
Designated Area
no GST in Labuan, Langkawi & Tioman
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http://www.gst.customs.gov.my
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4
Registration
for GST
Registration Before Appointed Date
Liable to be registered if
a person makes taxable supplies of goods
and services in Malaysia; and
reasonable grounds to believe his taxable
turnover in the period of 12 months
immediately succeeding the appointed date
will exceed the prescribed threshold
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Registration Before Appointed Date
Taxable Turnover
Includes
standard rated
supplies
zero rated supplies
deemed supplies
such as private
use, fringe benefit,
etc.
Excludes
exempt Supplies
sale of capital
assets
imported services
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Registration Before Appointed Date
registration exercise begins 6 months before the appointed
date
persons liable must register 3 months before the appointed
date
commit an offence if fail to register
advisory audit
registration either electronically or manually
use GST-01
GST registration number issued upon registration
effective date is from the appointed date
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Registration Before Appointed Date
Future Method
Expected to exceed
threshold after AD
16 November 2014
Nov Dec
Appointed date is 1 April 2015
Date of registration
1 April 2015
Jan Feb Mar Apr
1 January 2015
1 November 2014
Period to
register
Last day to notify and
apply for registration
Current month (November) + next 11 months
31 October 2015
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GST Registration
Voluntary registration
for businesses below threshold
must remain registered for at least 2 years
Other types of registration
branches or divisional registration
group registration
group of companies
registration of foreigners
appointment of agent
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Wan Leng Whatt
GST Unit
Royal Malaysian Customs Department
Tel: 03-88822424
Email: lengwhatt.wan@customs.gov.my
Thank You
For Enquiries, please contact:
1300-88-500
03-8882 2111
www.gst.customs.gov.my
Email: gst@customs.gov.my
Fax: 03-7806 7599
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