Lecture 2

Goods and Services

Tax (GST)

Jan-16 1
Overview of GST

1. GST is a multi stage tax on domestic consumption.

2. Charged on all taxable supplies of goods & service in

Malaysia excepts those specifically exempted.

3. GST is also charged on importation of goods & services into

Malaysia.

4. Payment of tax is made in stages by the intermediaries in

the production & distribution process.

5. Although tax is paid throughout the production &

distribution chain, it is ultimately passed on to the final
consumer.

Jan-16 2
Overview of GST ...

1. Tax itself is not a cost to the intermediaries & does not

appear as an expense item in their financial statement.

2. In Malaysia, person who is registered under the Goods &

Service Tax Act 2014 is known as registered person.

3. Required to charge GST (output tax) on his taxable

supply of goods & services to his customers.

4. Allowed to claim input tax credit on any GST (input tax)

incurred on his purchases which are inputs to his
business.
Jan-16 3
 What is GST ?
Basic principles of GST:
Consumption tax in the form of a value added tax at each stage of the
business transaction up to the retail stage of the distribution.
Also know as Value Added Tax ( VAT ).
GST incurred on inputs is allowed as credit to the registrant and is
offset against the output tax.

INPUT OUTPUT

Raw materials, Goods

Rents,
Electricity, Services
Furniture BUSINESS
Professional
Services, etc.
(EXPENSES) (REVENUE)

GST on Inputs Claimed Input Tax GST on Outputs

= Input Tax Jan-16 = Output
4 Tax
Types of supply Output Tax Input Tax

Standard - Rated 6% Claimable

Zero - Rated 0% Claimable

Exempted No GST Charged Not Claimable

Out of scope supplies refer to those taxable supplies which fall

outside the scope of GST

Jan-16 5
 Computation of GST for Standard Rated Supplies

Business Entity Cost or Sales Tax on Output Tax on Input Net Tax paid Description of
(RM) (RM) (RM) transaction
Clay supplier 10.00 0.60 0.00 0.60 Sells to crockery
manufacturer at RM
10.60 inclusive GST
Crockery Sells to wholesaler at
manufacturer 50.00 3.00 0.60 2.40 RM 53 inclusive GST
of RM3.00 & claims
input tax of RM.60.
Wholesaler 70.00 4.20 3.00 1.20 Sells to retailer at RM
74.20 inclusive GST
of RM4.20 & claims
input tax of RM 3.00.
Retailer 100.00 6.00 4.20 1.80 Sells to customer at
RM 106.00 inclusive
of GST of RM 6.00
and claims input tax
of RM 4.20
GST collected by the government 6.00
Customer 106 Bears GST of RM6.00

Jan-16 6
 Computation of GST for Exempt Supplies
not subject to GST therefore cannot charge output tax to the consumer.

cant claim input tax credit in acquiring these supplies

Level of Supply Sales price (including GST) Payment to the Govt.
Raw material Supplier Sales price = RM 50.00 GST collection = RM 3.00
GST = RM 3.00 Less: GST paid = RM 0.00
Total Sales Price = RM 53.00 GST payable = RM 3.00

Manufacturer Sales price = RM 100.00 GST collection = RM 6.00

GST = RM 6.00 Less: GST paid = RM 3.00
Total Sales Price = RM 106.00 GST payable = RM 3.00

Service Provider Sales price = RM 129.00 GST collected = RM 0.00

(exempt supplier)
GST = RM 0.00 Less GST paid = RM 0.00
Total Sales Price = RM 129.00 GST payable = RM 0.00
Note:
Medical services is an exempt supply
Hospital cannot claim back GST on input
Consumer does not pay any GST Jan-16 7
 GST Model

To replace current tax system Goods & Services Tax (GST)

Sales Tax & Service Tax Rate = 6 %

5%, 6%, 10% &specific rate
various Thresholds Threshold = RM 500,000

GST is charged on goods & services that are :

Supplied in Malaysia

Imports

Jan-16 8
 Zero-rated Supply

Agriculture produce paddy Foodstuff rice, sugar,

& fresh vegetables table salt, plain flour and
cooking oil

Livestock supplies meat, Poultry & Eggs

mutton , swine

Supply of the first 300 units of

0% Fish, prawns, cuttlefish, electricity for domestic users.
crabs, oyster, cockles, etc.
First 35 cubic meters of water
per month to domestic users.

Supply of the first 35m Exported goods & services

Of water to domestic users

Claim for input tax credits on purchases to make

these supplies Jan-16 9
 Exempt Supply

GST
Ron 95 petrol,
Diesel, LPG, Bread,
medication for 30
types of diseases.

Public Transportation Rail, Bus, Taxi and Ferry Highway Toll

Land for residential, agriculture & general use Accommodation (28 days)

Funeral in a package Private health & education

Jan-16 Financial
10 Services
 Supply by the Govt

Federal & State Local Authorities &

Government Statutory Body
Supplies made in the
regulatory and
Out of scope All supplies by Federal & enforcement functions.
State Government E.g. assessment rate
collection, issuance of
licenses to hawker or
restaurant, penalty

Supplies that have been Non R & E functions i.e.

directed by the Minister business activities
Subject to in the GST (Government
GST Taxable Supply order) E.g. rental facilities; stall /
hall rental
E.g. Supply made by
advertising -RTM, Prison
Department; treated water
Need to pay GST on Need to pay GST on their
Acquisition their acquisitions acquisition

Relief on selected goods Relief on11selected goods

Jan-16
 Scope of the Tax

Scope & Charge

Taxable supply meets this 5 criteria

1. There must be a taxable person

2. The taxable person makes a supply

3. Consideration must be given in return for the
supply

4. In the course of furtherance of business

5. Place of supply must be in Malaysia

GST is charged on imported goods into Malaysia

Jan-16 12
 Business

Deemed business para 5 of Sch 1

Provision of facilities or advantages by a club, association, society,

management corporation, joint management body or organization
for a subscription

Disposal of a business as a going concern. Relief from GST if

business transferred is a going concern before and after the
transfer, both transferor and transferee are GST registered persons,
transferee must used the assets to continue on the same kind of
business of transferor,

Disposal of assets or liabilities of a business whether or not for a

consideration unless gift < RM500 is exempt or zero rated or no
input tax is claimed; samples with company logo etc

Business assets put to private use such as companies canopies

used by employees
Jan-16 13
 Taxable Person
Meaning of person

Includes individuals, corporation, Federal Government, State

Government, statutory body, local authority, society, trade union, co-
operative society, trust, partnership and any other body, organization,
association or group or persons, whether corporate or unincorporated.
Scope
Includes natural and juridical persons:
Individuals, 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
Meaning of taxable person
A person who is or is required to be registered for GST
Jan-16 14
 How to be a taxable person?

Mandatory Registration
Registration is mandatory for businesses whose taxable turnover
> the prescribed threshold of RM 500,000 per annum.
Importance of Registration
A sale or supply is subject to GST only if the supplier is registered,
except in the case of imported services
Input tax can be claimed if you are registered
GST returns must be submitted if you are registered

Jan-16 15
 GST Registration
Determination of taxable turnover
Total value of taxable supplies any month and the previous 11
months (historical turnover).
OR
Total value of taxable supplies of any month and next 11 months
(future turnover).
Includes:
Standard rated supply
Zero rated supply (includes goods exported)
Deemed supply (disposal of business assets, business assets held
on last day of registration, private use of business assets, supply of
services to connected persons without consideration, business gifts
> RM 500).
Disregarded supplies (supplies between members of the same
group).
Jan-16 16
 GST Registration
Determination of taxable turnover

Taxable turnover does not include the GST component of the

supplies.

In working out the value, you should exclude:

Exempt supplies.

Disposal of capital assets of the business.

Imported services.

Supplies of imported goods made within a warehouse (warehousing

scheme).

Supplies made by a foreign principal or recipient, in accordance with

Approved Toll Manufacturing Scheme.

Out-of-scope supplies (i.e. a supply from a place outside Malaysia to

another outside Malaysia)
Jan-16 17
Supplies made between designated areas.
 GST Registration
The turnover period
At any particular time, your historical taxable annual turnover is measured
over the 12 month period ending at the end of the current month.
Your future taxable annual turnover is measured over the 12 months period
starting at the beginning of the current month.
Example
If the current month is October 2017, the historical annual taxable turnover is
measured from the start of November 2016 to the end of October 2017.
The future GST turnover is measured from the start of October 2017 to end of
September 2018.

This rule means that both your historical and future annual turnover may change
every month.

Need to monitor closely to work out if an obligation to register has arisen or likely
to arise as a result of projected growth

Jan-16 18
Examples

Historical method
Value of supplies for May 2016 RM100,000
Value of supplies for 1 June 2015 30 April 2016 RM400,200
Annual turnover RM500,200

The taxable person must apply to register for GST within 28 days
from the end of the month during which the taxable person meets
the threshold of RM500,000 ie by 28June 2016

Future method
Say taxable supplies for June 2016 RM100,000
Expected turnover for July May 2017 RM400,200
When should the taxable person register for GST?

XY Sdn Bhd is liable to apply for registration by 28 June 2016.

Jan-16 19
 GST Registration
Notification of Liability & Application to Register
You have to notify the DG about your liability to register within 28 days of
becoming liable. Say if you have ground to believe that annual taxable
turnover is more than million in Mar 2017, then you are liable to apply for
registration by 28 Apr 2017.
To apply for registration within 28 days from the end of the month where
taxable turnover exceeds or expect to exceed RM 500,000.
The effective date of registration will be on the 1st day of the following
month by DG ie 1 May 2017

Penalty

Fine < RM50,000 or

Imprisonment<3 years or
To both

Jan-16 20
 GST Registration

Who is not liable to register ?

Any person :-

Making wholly exempt supply.

Making supply in designated areas i.e. Langkawi, Labuan &

Tioman

Making taxable supply below threshold

Making out of scope supply ( non business supply,

government supply except broadcasting services, supply
made outside Malaysia)

Jan-16 21
 GST Deregistration

End of liability & Deregistration

Cease to make taxable supply ( mandatory registration)

Cease to have the intention to make taxable supply
(voluntary registration)
Cease business.
Value of taxable supply for next 12 months is not expected
to exceed the threshold.
Notification to be deregistered - to notify within 30 days.
To continue to fulfill obligations until notification of effective
date of deregistration:

To charge GST
Submit GST returns
Jan-16 22
 GST Registration

Voluntary registration

Business below the threshold level of RM 500,000 per

annum
Business which intends to make taxable supply
Business establishment in Malaysia but makes taxable
supply outside Malaysia
Benefits
To recover input tax for start-up cost
To avoid giving impression of a small operation

Note:
Registration may be cancelled if fail to make any supply by the intended date

Must remain registered for not less than 2 years

Jan-16 23
 GST Registration
Types of registration
Sole proprietorship

Single taxable person

Group of companies.

Partnership.

Societies or similar organization.

Branch or Division
Personal representative

Transfer of going concern (TOGC)

Joint Venture

Single entity

Jan-16 24
 Responsibility of a registered person

Account for GST on taxable supplies made and received ( i.e. output
and input tax).

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

Jan-16 25
 Offence & Penalty
Failure To Register
Fine not exceeding RM 50,000 or imprisonment not exceeding 3 years or both
Late Registration
Subject to late registration penalty based on the number of days late for
registration (late registration period).
Late registration period is the period beginning the date the person should
have registered to the date immediately before he is registered.
Effective date of registration for late registration is the date applied for
registration.

Disallowed to take effect retrospectively.

Net output tax subject to late payment penalty based on respective taxable
period.

Jan-16 26
 Supply
Section 4 GST Act
Defines a supply as all forms of supply
Include imported services
Done for consideration.
Anything which is not a supply of goods is a supply of services.
General Meaning
To furnish, serve or provide something
Generally, a transaction is a supply if:
Someone does something or agrees to do something in return for a
consideration and;
Involves a supplier and a receiver
Example
Selling something
Hiring or renting something
Doing something for some one else ( a service)
Enter into or release from an obligation to do anything or to refrain from an act
Something that may be done illegally Jan-16 27
 Types of Supply
Taxable supply

Standard rate supply ( including disregarded supply)

Zero rated supply

Non taxable supply

Exempt supply

Out of scope supply

Non business supply

Supply made outside Malaysia

Supply below the threshold

Some Government supply

Supply made by statutory bodies and local authorities with respect

to regulatory and enforcement function
Jan-16 28
 No Money, Fine
or Donation
in Cash

Outside
Scope of
Supply

Jan-16 29
 Place of Supply for goods
For GST to be charged, the supply must be made in Malaysia.
The test varies according to whether the supply is of goods or services.
Goods
A supply of goods is made in Malaysia in the following circumstances:
Goods removed / delivered from a place in Malaysia to another place in
Malaysia.
Goods are removed / delivered from a place in Malaysia to another place
outside Malaysia. (but such supply is zero rated).
A supply of goods is not made in Malaysia under the following circumstances:
Goods are removed / delivered from a place outside Malaysia to another
place outside Malaysia out of scope e.g. goods removed from Bangkok to
Singapore ( but one may register in Malaysia to be entitled for credits on
input tax incurred in Malaysia e.g. on rental, electricity on an administrative
office in Malaysia)
Goods are removed/delivered from a place outside Malaysia to a place in
Malaysia Import and subject to GST at the point of importation.
Tax shall be due and payable upon all goods supplied from a Designated
Area (Labuan, Langkawi) to Malaysia as if the supply were imported into
Jan-16 30
Malaysia.
Good imported into Malaysia

Subject o GST on importation unless relieved (zero

rated and exempt supply, free zones, designated areas)
Must be paid at the point of entry before goods are
released

Jan-16 31
 Place of Supply (PoS) for Services
A supply of service is deemed to be made in Malaysia if the supplier
belongs in Malaysia ( and is deemed to be made in another country if the
supplier belongs to another county).
GST applies on the supply of services when the supplier has:
A business establishment or a fixed establishment in Malaysia and
no such establishment elsewhere;
No business establishment or fixed establishment in any country but
his usual place of residence is in Malaysia, and
He has business establishments or fixed establishments both in
Malaysia and elsewhere and the supply is most directly connected
with an establishment in Malaysia.
A fixed establishment includes a branch or agency through which a
person carries on business in that country. The phase usually place of
residence means:
In relation to a body corporate, the place where it is incorporated or
otherwise legally constituted.
In relation to an unincorporated body of person, the place where the
body has its center of administration;
In relation to individual, the place whereJan-16
he usually 32
resides
 Place of Supply (PoS) of Services
Summary Where the Supplier Belongs

Business / Fixed Business / Fixed Establishment

Establishment in Establishment in most directly
Malaysia other country concern with Belongs To
supply
YES NO - MALAYSIA
- OTHER
NO YES COUNTRY
YES YES MALAYSIA MALAYSIA
YES YES OTHER OTHER
COUNTRY COUNTRY
NO NO - USUAL PLACE
OF RESIDENCE

If the supplier belongs to Malaysia, then he is within the scope for GST
If not belong to Malaysia Zero Rated.
Jan-16 33
 Place of Supply (PoS) for Services
Example

1. Upon receiving an order from a customer in Sarawak, Universal Cos head

office in Singapore instructs its branch in Sabah to supply engineering
services to the customer in Sarawak. The Supplier of the services belong in
Malaysia and not Singapore since the establishment which is most directly
concerned with the supply is in Malaysia.

2. In (1) above, if the customer is in Brunei ( instead of Sarawak), the supply is

still regarded as made in Malaysia, but it would be zero-rated supply as the
customer does not belong in Malaysia.

Jan-16 34
 Time of Supply (ToS)
Refers to the time when the supply is being made S. (11)

ToS determines when a taxable person should account for GST in

the taxable period that ToS occurs

Basic Tax Point (BTP)- see next slide

Actual Tax Point (ATP) may occur before or after

BTP payment received before BTP, ATP is date of
payment; invoice issued before BTP: ATP is date
of invoice; invoice issued within 21 days after
BTP: ATP is date of invoice

Jan-16 35
 Time of Supply Rule

S.11 (2) Basic Tax Point

Basic tax point for supply of goods:

The time when the goods are removed/delivered

The time when goods are made available to the person

(goods supplied on a sale or return terms i.e. consignment sale), at the time: BTP will be
the earlier of

When it becomes certain that the taxable supply has taken place ie when the
consignee (Tesco) issues a statement of sales to the consignor(supplier) stating
the goods have been sold or otherwise accepts the goods Or

Twelve months after from the date the goods were sent to the consignee.

Basic tax point for supply of services:

When the services are performed.

RMC considers a service a performed when the work is done or completed by

the supplier. Jan-16 36
 Time of Supply of goods Rule

Basic Tax Point

01/01/2016 20/02/2016
Goods Removed
Goods made available
Contract made /
Sales become certain or 12
Purchase order
months after removal, w.i.t.e.
Services performed

. The time of supply

Jan-16 37
 Time of Supply Rule
S.11 (4) Events before Basic Tax Point
Where before the basic tax point, when payment or part payment is
received or tax invoice is issued, ToS shall to the extent covered by the
invoice or payment, be treated as taking place at the time invoice is
issued or payment is received, whichever is the earlier.
E.g. Manufacturer agrees to supply 100 pairs of shoes to retailer. The
contract price is RM 100,000 and the GST @ 6% is RM 6,000. Before
manufacturer delivers the shoes to retailer, he collects part payment of
RM 30,000 from the retailer. This payment triggers the time of supply and
the manufacturer has to charge GST when he receives payment from the
retailer

S.11 (6) - Power of the DG

On request made in writing by a taxable person, the DG may alter the time
when the supply is made
E.g. tax invoice issued by bank, supplies by Govt. when the value is
unknown.

Note: It is an offence under the GST Act if tax invoice is not issued
within 21 days after the supply has taken place.
Jan-16 38
 Time of Supply Rule
Illustration of Time of Supply Rule
Scenario :Payment or invoice before basic tax point

20 9 10 Basic Tax
1 Jan Ordered Payment Invoiced
Mac April Mei point

Goods removed/
Contract Signed Date of payment Tax invoice issued
Services performed
The ToS is treated as taking place at the earliest of the following event:

Date when payment is made 20 Mac

Date when invoice is issued- 9 Apr

The time of supply is Date of payment received 20 Mac

S.11(5) 21 days rule

If the tax invoice is issued within 21 days after the basic tax point, then the
time of supply is the time the tax invoice is issued.
Jan-16 39
 Time of Supply Rule

Illustration of 21 days rule

20/03/2016
10/07/2016
Goods
removed / Tax
Contract Date of
Services invoice
Signed payment
performed issued
ToS

01/01/2016 09/04/2016
Basic Tax Point
20/3 to 9/4
is within 21
days

Time of Supply
is date of tax
invoice Jan-16 40
 Time of Supply Rule

Basic Tax
Point (BTP)

Is tax
invoiced
issued
within 21
days ?
YES NO

Time of Supply is
Invoice Date, ToS is
provided payment BTP date
is not received
before BTP date
Jan-16 41
Jan-16 42
 Time of Supply Rule
Example

1. CIPS Bhd, a registered person with monthly taxable periods, delivered

goods to its customer on 25 April 2015, but issued the tax invoice only on
10 May 2015. As the tax invoice has been issued within 21 days from the
date of removal, the time of supply is 10 May 2015 and thus the output tax
is to be accounted for in the May 2015 taxable period.

2. Say in (1) above the tax invoice is raised only on 19 May. As the tax invoice
is not issued within 21 days from the date of removal, such date (i.e. 25
April 2015) is the time of supply and thus the output tax is to be accounted
in April 2015. (The delay in issuance of an invoice may also upset the
customer as his entitlement to input tax credit has been delayed).

Where the tax invoice is issued or payment is received prior to the basic tax
point, the date of such issue or receipt is taken as the time of supply, but only
to the extent cover by the invoice or payment (Refer to example below)

Jan-16 43
 Time of Supply Rule

Example

PNP & Associates accepted a client on 1 May 2015 for advisory services
which are to be performed from 1 June 2015 to 31 July 2015but a tax
invoice for the entire fee of RM 10,600 (inclusive of GST) was raised on 1 May
2015. On the same day, the client paid RM5,300 as an advance payment. As
the tax invoice had been issued on 1 May 2015the entire supply is taken to
be made on that day although the actual service is yet to be rendered and only
half of the amount had been received.

In (1) above, if PNP & Associates raised the invoice only on 10 August 2015
only RM5,300 is taken as supply made on 1 May 2015. If no payment was
made until 10 August 2015that would be the time of supply for the remaining
RM5,300.

Jan-16 44
 Time of supply for imported services

Supplier belongs in a country other than Malaysia

and services supplied to a recipient in Malaysia and
the services are consumed in Malaysia
Deemed to be a supply made by the recipient
himself and GST is accounted for as output tax by
him in the taxable period in which payment is made
to supplier- reverse charge mechanism
Recipient carries on a business and the service
acquired for the purpose of such business
Example is royalty payment on an IP
Earlier of
a) The date when payment is made by the recipient or
b) The date when any invoice is received from the
supplier outside Malaysia

Jan-16 45
 Value of Supply Rule
S.15(2) Where the supply is for consideration in money, the value of the
supply shall be taken to be an amount with the addition of the tax
chargeable, equal to the consideration.
Example:
A sells a printer to B and receives RM 260 (inclusive of GST)
Value = money consideration GST portion
GST rate is 6%
Tax Fraction = Rate / (100 + rate) = 6 / 106
Value of supply = consideration GST
= RM 260 ( 6/106 x RM 260)
Situations where receipts of money is not consideration

= RM 260 RM 14.72 Compensation / LAD Payments

Grants where a person does not get benefits
= RM 245.28 Dividends
Donations
GST = consideration x Tax Fraction Loan Repayments
Capital injection
GST = RM 260 x 6/106 = RM 14.72

Jan-16 46
 Value of Supply Rule
S.15(5) Where the supply is not for a consideration , the value of the supply
shall be taken to be the open market value (OMV) of that supply.

Example:
Supply laptop without consideration
Value of laptop = OMV of the laptop
Assume acquired laptop HP model 4-1053X @ RM 3,800 in 2010
Dispose the laptop without consideration in 2012. OMV of the laptop is RM 1,000
Account for GST @ 6/106 x RM 1,000 = RM 56.60

Jan-16 47
Value of Imported goods and
services
S.16 Value of goods imported
Value of imported goods = value for customs duty + any custom
duty + any excise duty. Assume custom value is RM10,000, custom
duty is 5%, excise duty is 10%.
Value of goods = RM10,000 + (5% x RM 10,000) + (10% x RM 10,000)
= RM 11,500
GST = 6% of 11,500 = 690
S.13 Value of imported services
Value = Consideration paid
E.g. Consideration paid exclusive GST = RM 26,000
GST = RM 26,000 x 6% = RM 1,040

Jan-16 48
 When to use OMV
Where the consideration is partly in cash and
non- monetary
Where the supply of goods is not for a
consideration; if supply of services is free, then
not a taxable supple, no GST
Supplies between connected persons where the
consideration is below the OMV and the
recipient is not entitled for full input credit.
Example
X and Y are colleges that are registered for GST
and operate from the same campus. X is a wholly
owned subsidiary of Y. Both companies make both
taxable and exempt supplies.
X employs cashiers for both colleges. The OMV of
the cashier service has been ascertained as
RM100,000/year.

Jan-16 49
How much is the output tax to be accounted by X
if
1. It does not impose any charge for the service
2. It charges only RM40,000/year
3. It charges RM150,000/year

Solution
1. There is no consideration, thus X has to
account for output tax based on OMV. Output
tax is 6/106 * 100,000 = 5,660.38
2. Given that consideration < OMV and that the
customer is not entitled for full input tax,
output tax is on OMV ie 6/106 * 100,000 =
5,660.38
3. Output tax is 6/106 * 150,000 = 8,490.57

Jan-16 50
 Connected Persons

Connected person (para 2, Third Schedule) Person deemed

connected if:

They are officers or directors of one's business

Partners in business

Person holds 5% or more of voting stock / share

One of them directly or indirectly controls the other

Both of them are directly or indirectly controlled by a third person

Together they directly or indirectly control a third person; or

Members of same family

Jan-16 51
Services between connected persons
- Unlike goods, provision of service without consideration is not
treated as a supply except when it is provided to a connected
person. The output tax is to be accounted for based on the open
market value of the service
- Examples
- A massage centre provides a free neck massage for customers
who book 4 sessions in advance. This is a free service which is
not a supplyie no GST
- Alpha and Beta are subsidiaries of Delta. All 3 companies are
registered for GST, but not under group registration. Delta
employs full time workers who do billing and bookkeeping for
itself as well for the subsidiaries. Regardless of whether actual
consideration is charged, Delta is required to account for output
tax on services provided

Jan-16 52
 A taxable period for a taxable person
Generally, taxable periods are periods of either 1 calendar month
or one calendar quarter. If your annual taxable supplies at the time
of registration >= RM5 million you would have a monthly taxable
period.; GST will be paid within one month after the taxable
period. Example invoices for Jan, GST shall be paid latest by end
Feb

Where the total value of all his taxable supplies in the period of
twelve months < five million ringgit, he will be assigned quarterly
taxable period
Example
Jan- Mar invoices---GST to be paid latest by 30 Apr

Jan-16 53
Input tax credits
Partial exemption mixed supplier
Blocked input tax

Jan-16 54
 MIXED SUPPLIER
A mixed supplier is a taxable person who makes both taxable supplies
and exempt supplies. If the de minimis rule is satisfied for a particular
taxable period, he is entitled to claim credit in respect of all input tax that
he incurred during the taxable period ie no apportionment of residual
input tax and .
Otherwise he is entitled to claim credit in respect of input taxes that are
attributable to taxable supplies and part of the input taxes that are
common to both taxable and exempt supplies :
Total input tax incurred in the taxable period

Attributable to taxable For acquisition that

Attributable to exempt
supply (standard rated are common ( residual
supply
& zero rated) input tax)

Only a proportion
Entitled to full credit Not 55entitled to credit
allowed as credit
 Apportionment

Input
Used
Wholly Wholly
attributable to attributable to
taxable supplies Exempt supplies

Attributable to both
taxable & exempt
supplies such as
electricity, common
expenses
Claim 100% Cannot claim
Input Tax input tax

Apportionment
Rule applies
56
 Apportionment

Mechanism for ITC Apportionment

Turnover-based method as a standard method for

apportioning any residual input

Taxable portion = Value of taxable supplies

Value of all supplies

Round up or down to the nearest two decimal places

Input tax claimable = Taxable portion x residual input tax

57
 Apportionment
Example

Taxable Supplies RM 300,000

Exempt Supplies RM 250,000
Residual Input Tax RM 8,000

Taxable portion = RM 300,000

x 100%
RM 300,000 + RM 250,000

= 54.54% (nearest two decimal places)

Input tax claimable = 54.54% x RM 8,000 = RM 4,363.20

58
 Apportionment Rules

Applicable if
registered person
has exempted
supply
De Minimis Limit

Exempt input tax can be recovered in full if the total value is

less than the prescribed amount.
Prescribed amount of de minimis limit
Total value of the exempt supplies does not exceed
An average of RM 5,000 per month &
Not exceeding 5% of the total value of the total
supplies (all taxable and exempt supplies) made in the
period. 59
 De Minimis Rule
Example 1

Taxable period = One month

Value of taxable supply = RM200,000
Value of exempt supply = RM 50,000
Input tax attributable to taxable supply = RM 10,000
Input tax attributable exempt supply = RM 2,000
Residual input tax = RM 1,000
Test for deminis rule first.
Value of exempt supply does not exceed RM 5,000 and 5% of total supply ?
If yes, All exempt input can be claimed. Otherwise use the formula.

In this case de-minimis rule is not fulfilled.

Therefore residual input tax that can be claimed = 200,000/(200,000 +

50,000) x 1,000 = RM 800

Total ITC can be claimed in January = RM 10,000 + RM 800 = RM 10,800

60
Composite Supply
Refers to a single supply with more than 1
component which is
- Incidental
- Integral or
- Tie in
The entire supply is either standard rated, zero
rated or exempt
Includes inflight catering for which no separate
charge is imposed see British Airways v Customs
& Excise Commissioners or Sea Containers Ltd v
Customs and Excise Commissioners

Jan-16 61
 Input tax credit
Is a credit for tax incurred on business inputs in Malaysia
Input tax comprises
a. Tax on any supply of goods or services made to a taxable person
and
b. Tax paid or to be paid by a taxable person on any importation of
goods

Not restricted to input tax incurred in respect of raw materials

only but on goods or services acquired such as capital assets or
business overheads or imported services

Jan-16 62
Examples
1. In April 2016, XYZ Sdn Bhd incurred
electricity costs of RM848. Input tax credit
of RM48 can be claimed (848x6/106)
2. XYZ Sdn Bhd bought packing materials from a
non registered person. Since the supplier did
not charge any GST, XYZ is not entitled to
any credit.
3. On 1 June 2016, XYZ imported machinery on
which he paid GST of RM60,000. If he is in a
monthly taxable period, he would be eligible
for input tax credit of RM60,000 in the June
2016 taxable period.

Jan-16 63
Circumstances under which input tax credit is
not available
1. incurred by a non taxable person
Happy Mart is not a taxable person. He
bought a product at unit price of RM10.60
(inclusive of 60 sen GST). The whole RM10.60
would become the cost of inventory.

2. Non business use

A GST registered individual carrying on a
business acquires 5 computers of which one
computer is for personal use. He can only claim
input tax credit only in respect of 4 computers

Jan-16 64
Blocked input tax
Cost for the business- use for dual business/
private purpose
i. Acquisition or importation of passenger
motor car car for a director
ii. Repair & maintenance of motor car
iii.Hiring of passenger motor car
iv. Recreational or sports club subscription fee
principally for recreational or sporting
purpose.
v. Medical and personal accident insurance
premium or takaful contribution. Life
insurance premium is an exempt supply- no
ground to claim input tax

Jan-16 65
Blocked Input tax ---continued

vi. Medical expenses connected with the provision of

medical treatment to an employee as healthcare
services are exempt,
vii. Family benefits provided for the benefit of an
employees wife, husband, child or parents
example XYZ Sdn Bhd incurred RM10,600 inclusive
of GST in providing a leave passage (travelling &
accommodation) for Daniel and his wife & son. No
credit is available in respect of GST incurred for
wife & son.
viii.Entertainment expenses to potential customers
are blocked except for entertainment of
employee or existing customers
3. Attributable to exempt supplies
Jan-16 66
Circumstances under which input tax credit is not available

4. Attributable to exempt supplies except for De minimis rule,

incidental exempt financial supplies

Jan-16 67
End of lecture

Jan-16 68