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

LATEST GST DEVELOPMENTS

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

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LATEST GST DEVELOPMENTS

2014 Budget Announcement (cont):
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.

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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

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Supply of
Goods or Services
in Malaysia
- belonging concept
i.e. where the
supplier is located

Scope of GST (contd)

Charging and Collection of GST
GST is
charged on

Supply of Goods or Services in

Malaysia

Importation of Goods into

Malaysia

Goods or Services
supplied by local supplier

GST is collected by Customs

at the point of importation

GST is collected by
the supplier who is
registered with Customs

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THE BASICS OF GST

THE BASICS OF GST

Differences between Sales/Services Tax and GST
Attribute

Sales and Services Tax (SST)

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.)

Scope

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)

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

rate)

Service Tax is at 6%

Rates

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Single stage

Goods and Services Tax (GST)

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

Multi-stage

RM 500,000 of annual taxable

turnover

Proposed GST rate is at 6%

THE BASICS OF GST

Types of Supply
Categories 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)

Examples of Supply

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.

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THE BASICS OF GST

The Basic GST Process

Tax remitted
to Customs
RM18

Output Tax

Price = RM300
GST = RM18

GST collected
from customers

Less
Price = RM100
GST = RM6

Input Tax

GST paid on
business purchases

RM6

Tax remitted
to Customs
Price = RM100
GST = RM6

Price = RM150
GST = RM9

RM6

RM9

Equals
Net GST

RM12

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Payable
to Customs

Refundable
by Customs

Output Tax > Input Tax

(Positive)

Output Tax < Input Tax

(Negative)

-RM3

THE BASICS OF GST

Sales Price (Before GST)

Proposed GST rate = 6%

Price = RM500

Supplier
Sale Price = RM530 (inclusive of GST)

Price = RM1,000

Manufacturer
Sale Price = RM1,060 (inclusive of GST)

Price = RM1,500

Wholesaler
Sale Price = RM1,590 (inclusive of GST)

Consumer
Payment to Wholesaler= RM1,590
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Payment to Customs
By Supplier
GST collected
Less: GST paid
GST payable

30
0
30

By Manufacturer
GST collected
Less: GST paid
GST payable

60
30
30

By Wholesaler
GST collected
Less: GST paid
GST payable

90
60
30

By Consumer
GST paid = 90

REGISTRATION : LIABILITY TO
REGISTER, WHEN TO REGISTER AND
HOW

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

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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.

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GST REGISTRATION FORMS OF REGISTRATION

Forms
Voluntary Registration
[Clause 24]
Group Registration
[Clause 27]

Explanation
Business below threshold (RM500,000) may apply for voluntary registration
Once registered shall remain to be registered for at least 2 years
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)

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ACCOUNTING FOR GST REGISTRATION

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

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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

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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.

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ACCOUNTING FOR GST FILING OF RETURNS

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

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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

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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.

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GST IMPACT AND CONSIDERATIONS

GST impacts ALL aspect of BUSINESS

Finance &
Administration

Sales &
Marketing

Purchasing &
Procurement

GST

Legal,
Compliance
&
Governance

Information
Technology

Human
Resource

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Quality
Assurance &
Production

GST Considerations
Identification and classification of work streams by inputs and outputs

Some examples of Divisions:

Construction & Engineering

procurement, suppliers

Sales & marketing

sales and marketing, after-sales service,

Admin

admin, HR, training, employee claims, benefits

account payable & receivable, treasury, management

reporting, capital expense, taxation, budget

long term contracts, warranty and etc.

Accounts & Finance

Legal Department

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GST Considerations Common GST Issues

Supply taxable, place, time, value?
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

Discount

Invoice & Record keeping

GST treatment?

GST treatment?

Existing vs new sets of documents?

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GST Considerations Input / Output Taxes

Claim/charge of input/output taxes
[local and overseas suppliers]
Discounts

Gift Rule

JV Agreements

Long Term Contract

To be reviewed during the transition period?

Stock
Consignment?

Hire Purchase/
Leasing
GST treatment?

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To be reviewed during the transition period?

Approved Trading Schemes

What is available?

ACTIONS TO BE TAKEN

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

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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.)

ACTIONS TO BE TAKEN (cont)

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

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TYPICAL BDO GST IMPLEMENTATION PLAN

Pre project
planning

Stage 1
Impact Study

Stage 2
Mapping
Exercise,
Data
Verification

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 companys
business model and
timetable for
implementation
Request for
information

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Preliminary interview
and use of
questionnaires

Analysis of documents,
diagnosis, further
verification and
clarification

Mapping exercise

GST Help desk

GST Implementation
advisory strategy
report

Gap analysis

High level report

Data verification and

gap analysis (based on
final GST legislation)

Stage 3
Implementation

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

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

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Please contact David Lai

at 03-2616 2978 or davidlai@bdo.my
for further information or assistance.