Goods and Services tax (GST)

Goods and Services tax (GST)

Goods and Services tax (GST)

Malaysia Goods and Services Tax (GST) is a consumption tax in the form of value added tax.    GST incurred in each stage of transaction up to the retail stage distribution.

GST also known as Value Added Tax (VAT) in other countries.

GST are charge on goods and services that are :

  • supplied in Malaysia by taxable person in the course of furtherance its business in Malaysia
  • imported goods and services to Malaysia

GST_malaysia

GST can only be levied and charged if the business is registered under GST. A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold.

Therefore, such businesses cannot charge and collect GST on the supply of goods and services made to their customers. Nevertheless, businesses can apply to be registered voluntarily.

Scope of GST Tax

Why GST ?

GST is proposed to replace the current consumption tax i.e. the sales tax and service tax (SST). The introduction of GST is part of the Government’s tax reform programmed to enhance the efficiency and effectiveness of the existing taxation system.

GST is proven to be a better tax system as it is more effective, efficient, transparent and business friendly and could spur economic growth as well as increase competitiveness in the global market.

GST is capable of generating a more stable source of revenue to the nation because it is less susceptible to economic fluctuations.

It is important to replace the existing SST in order to eliminate its inherent weaknesses such as cascading and compounding effects, transfer pricing and value shifting, no complete relief on goods exported, discourage vertical integration, administrative bureaucratic red tape, classification issues and etc.

Various benefits that GST can offer to Malaysian consumers and businesses are:

  1. Improved Standard of Living – The revenue from GST could be used for development purposes for social infrastructure like health facilities and institutions, educational infrastructures and public facilities to further improve the standard of living.
  2. Lower Cost of Doing Business – Under the current system, some businesses pay multiple taxes and higher levels of tax-on-tax (cascading tax). With GST, businesses can benefit from recovering input tax, thus reducing cost of doing business.
  3. Nation-Building – GST is a better and more efficient method of revenue collection for the government. More funds can be channeled into nation-building projects for progress towards achieving a high income nation.
  4. Fairness and Equality – With the GST, taxes are levied fairly among all the businesses involved, whether they are in the manufacturing, wholesaling, retailing or service sectors.
  5. Enhanced Delivery System – GST will be administrated in a fully computerized environment, therefore speeding up the delivery, especially for refund claims. This makes it faster, more efficient and reliable.
  6. Increase Global Competitiveness – Prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supplies chain. This will strengthen our export industry, helping the country progress even further.
  7. Enhanced Compliance – The current SST has many inherent weaknesses making administration difficult. GST system has in-built mechanism to make the tax administration self-policing and therefore will enhance compliance.
  8. Reduces Red Tape – Under the present SST, businesses must apply for approval to get tax-free materials and also for special exemption for capital goods. Under GST, this system is abolished as businesses can offset the GST on inputs in their returns.
  9. Fair Pricing to Consumers – GST eliminates double taxation under SST. Consumers will pay fairer prices for most goods and services compared to SST.
  10. Greater Transparency – Unlike the present sales tax, consumers would benefit under GST as they will know exactly whether the goods they consume are subject to tax and the amount they pay for.

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

What you need to do

GST requires businesses who have exceeded the prescribed threshold to register and to keep records of input and output tax. Businesses report their liability in a specific period called taxable period.
Explore the following sections to understand your responsibilities and obligations as a registrant under GST.

  • Registering your Business
  • Issuing Tax Invoices
  • Accounting for GST
  • Filing Tax Returns
  • Input Tax Credit Mechanism
  • Claiming GST Refunds
  • Paying GST
  • Offences
  • Review and Appeals

2. Issuing Tax Invoices

    When you charge GST, you need to issue a tax invoice showing the amount of GST and the price of the supplies separately. The tax invoice has to be issued within 21 days after the time of the supply.
    Particulars to be shown in the tax invoice:
  • The words ‘tax invoice’ in a prominent place;
  • The invoice serial number;
  • The date of issuance of the invoice;
  • The name (or trade name), address and GST identification number of the supplier;
  • The name and address of the recipient of the supply;
  • A description of the goods and/or services supplied;
  • The quantity or volume of the goods and/or services supplied, for example, litres of petrol, kilos of meat or hours of labour;
  • Any discount offered;
  • The total amount payable excluding tax, the rate of tax and the total tax chargeable shown as a separate amount;
  • The total amount payable including the total tax chargeable.
  • The Director General of Customs may upon request allow the tax invoice to be varied from the above whether in term of particulars in the tax invoice or issuance of other type of tax invoice e.g. simplified tax invoice.

The Director General of Customs may upon request allow the tax invoice to be varied from the above whether in term of particulars in the tax invoice or issuance of other type of tax invoice e.g. simplified tax invoice.

Simplified Tax Invoice

    An invoice that does not contain all the particulars as required in the standard tax invoice and subject to the approval of the Director General. Simplified tax invoice can be used by the GST registrant to claim ITC provided the value of the invoice (inclusive GST) does not exceed RM500.
    DG may allow the simplified tax invoice to be issued containing:
  • The name (or trade name), address and GST identification number of the supplier;
  • The date of issuance of the invoice;
  • The invoice serial number;
  • A description of the goods and/or services supplied;
  • The total amount payable including the total tax chargeable; and
  • For each rate of tax chargeable, the gross amount payable including tax and the tax rate applicable

3. Accounting for GST

    Basically, all taxable persons will be required to account for GST based on accrual (invoice) basis of accounting i.e. all output tax and input tax are to be accounted and claimed based on the time when the invoice was issued or received.
    However, certain categories of taxable persons may be allowed to use the payment (cash) basis of accounting. This facility may be given to businesses who carry out their activities solely on a cash payment basis.
    All business and accounting records relating to GST transactions are to be kept in Bahasa Melayu or English for a period of seven (7) years.

4. Filing GST Returns

    GST returns must be submitted to the GST office not later than the last day of the following month after the end of the taxable period.
    Taxable period is a regular interval period where a taxable person is liable to account and pay to the government his GST liability. The standard taxable period is on quarterly basis.
    However, a registrant may apply to be placed in other taxable period (monthly or 6 monthly) subject to specific conditions as follows:
Categories Periods Conditions
Standard Taxable Period Three months
  • Applicable to all taxable turnover not exceeding RM5 million
Non-standard Taxable Period One month
  • Applicable to taxable persons with annual taxable turnover exceeding RM5 million
  • applicable to other taxable persons on request and subject to approval
Six months
  • Special cases

5. Input Tax Credit Mechanism

    Businesses have to charge and collect GST on all taxable goods and services supplied to the consumers. Only businesses registered under GST can charge and collect GST.
    Businesses are allowed to claim whatever amount of GST paid on the business inputs by offsetting against the output tax.
  • The excess amount of output tax shall be remitted to the government within the stipulated period.
  • In the case where the amount of input tax cannot be fully recovered, businesses can make a claim for refund from the government.

Note:

  • Maximum time period to claim the input tax is 6 years from the date of supply.
  • Input tax credit cannot be claimed on blocked input such as GST paid on passenger motor car, club subscription fee, medical and personal accident insurance premium, medical expenses, family benefits, entertainment expenses except for employees and etc.
  • Apportionment rules have to be applied when the taxable person makes a mixed supply.

6. Claiming GST Refund

    Any refund of tax may be offset against other unpaid GST, customs and excise duties. Refund will be made to the claimant within 14 working days if the claim is submitted online or 28 working days if the claim is submitted manually.

7. Paying GST

    If your output tax exceeds the input tax, the difference shall be remitted to the Government together with the GST returns not later than the last day of the following month after the end of taxable period.
    Online GST payments through:
  • Banks (to be appointed).
  • Internet facilities.
  • Manual payment:
    • Payment via cheque/bank draft/money order must be made payable to ‘Ketua Pengarah Kastam’ and mail to:

Ketua Pengarah Kastam
Jabatan Kastam Diraja Malaysia
Kompleks Kastam Kelana Jaya
No.22 Jalan SS6/3
Kelana Jaya 47301
Petaling Jaya, Selangor

    Or
  • Pay at any nearest GST office counter from 8.00 am – 5.00 pm.

8. Offences

    Penalties may be imposed if the offences committed. Please read

GST penalties

    for details.

9. Review and Appeals

    Any person who is aggrieved by the decision of the officer of GST may apply for a review and revision to the DG within 30 days from the date of notification. Alternatively, such person shall make an appeal to the Tribunal within 30 days from the date of the decision.
    The appeal case can be represented by the taxpayer himself or by any person whom he may appoint. The hearing shall be conducted in a private proceeding unless both parties agree to an open court.

 GST Calculator

You can use GST Calculator http://gst.customs.gov.my/en/gst/Pages/gst_hdw.aspx

Official GST Webhttp://gst.customs.gov.my/

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