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Frequently Asked Questions (FAQs) on Malaysia Goods and Services Tax (“GST”)

GST, which was also known as a value added tax in other countries was implemented and took effect on 01 April 2015.

GST is charged on :-

  • the taxable supply of goods and services, which is standard rated and zero rated
  • on the importation of goods and services
  • by a taxable person / GST registered person
  • business provided in Malaysia

Following are the answers to the various frequently asked questions relating to Malaysia GST: 

A1: Beginning 1st October 2015, the registered person excluding ‘retailers’ must use a computer generated invoice or pre-printed invoice which is GST compliant.

In the case of ‘retailers’, they must use a GST compliant point of sale (POS) system or a GST compliant cash register to issue GST tax invoices.

A2:

(a) the word ‘tax invoice’ in a prominent place;

(b) the tax invoice serial number;

(c) the date of issuance of the tax invoice;

(d) the name, address and identification number of the supplier;

(e) the name and address of the person to whom the goods or services are supplied;

(f) a description sufficient to identify the goods or services supplied;

(g) for each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, excluding tax; (h) any discount offered;

(i) the total amount payable excluding tax, the rate of tax and the total tax chargeable to be shown separately;

(j) the total amount payable inclusive of the total tax chargeable; and

(k) any amount referred to in subparagraphs (i) and (j), expressed in a currency other than Ringgit, shall also be expressed in Ringgit in accordance with paragraph 5 of the Third Schedule of the GST Act 2014.

A3:

(a) the words “credit note” or “debit note” in a prominent place;

(b) the serial number and date of issue;

(c) the name, address and GST identification number of the supplier;

(d) the name and address of the person to whom the goods or services are supplied;

(e) the reasons for its issue;

(f) description of the goods or services;

(g) the quantity and amount for each supply;

(h) the total amount excluding tax;

(i) the rate and amount of tax; and

(j) the number and date of the original tax invoice.

A4:

(a) a change in the rate of tax in force under section 10 of the Act or a change in the descriptions of the zero-rated or exempt supply under section 17 or 18 of the Act as the case may be; or

(b) any adjustment in the course of business such as cancellation in the supply of goods and services, under or over stated GST amount and goods returned,

(c) and the change occurs after the return for the supply has been submitted to the Director General, a credit note or debit note shall be issued by the person making or receiving the supply.

A5:

(a) must be issued under the name of the registered person to be eligible for input tax credit. A tax invoice issued under the name of any person other than the registered person will not be eligible for input tax credit; and

(b) the GST amount must be shown on the tax invoice; otherwise the registered person is not allowed to claim input tax using the tax invoice.

A6: Only for mobile phone bill expenses used for business purposes are allowable for claiming of input tax. A registered person can use the mobile phone bill expenses invoice billed to his employee for claiming input tax as long as the expenses are reimbursed and accounted as business expenses. The GST amount must be shown on the tax invoice, otherwise the registered person is not allowed to claim input tax using the tax invoice.

A7: Yes, you may claim provided all these criterias are met:

1) The asset must be capitalised in accordance to standard accounting principal in Malaysia; and

2) The asset is still being used at the time of registration

A8: You may apply for approval to claim these input tax, while submitting to Custom’s Department for registration of GST.

A9: No, you are not allowed to claim unless these services are capitalised in accordance to standard accounting principal in Malaysia.

A10: GST were imposed on a person appointed as a director‐

(a) in his personal capacity (including government pensioner)

(b) on his expertise (example tax consultant, medical specialists, economists, accountants, including management of the company but hold positions in companies that are not subsidiaries/subsidiary)

(c) on his personality (example politician or NGO)

(d) A chartered accountant in a listed company is appointed as a director. He also is an expert and qualified person and has his own businesses or hold positions in other companies.

A11:

(a) the name, address and identification number of the supplier;

(b) the date of issuance of the tax invoice;

(c) the tax invoice serial number;

(d) a description sufficient to identify the goods or services supplied;

(e) for each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, including tax; (f) the total amount payable inclusive of total tax chargeable; and

(g) the rate of tax and the amount of tax chargeable.

A12: In the case of an approved tax invoice without the name and address of the recipient, the allowed input tax amount claimable is RM30.00 or less. If the GST amount is more than RM30.00, he can only claim the input tax up to a limit of RM30.00 using this invoice. Therefore, he must request for a tax invoice with the name and address of the recipient to enable him to claim the full input tax if it is more than RM30.00.

A13: Whenever a tax invoice of a particular supply is lost or misplaced, you may request the supplier to provide a certified true copy of the tax invoice as it is an offence to issue more than one tax invoice per taxable supply. This certified copy of tax invoice can be used for claiming input tax as long as the document is clearly marked “COPY” by the supplier.

A14: Pro-forma invoices are often used to offer goods or services to potential customers. Such an offer may or may not be taken up, and the goods or services will not be supplied unless payment is received. A pro forma invoice is not regarded as a tax invoice and they cannot be used as evidence to reclaim input tax, even if they show all the details required for a tax invoice. If you use pro-forma invoices in this way, you should make sure that they are clearly marked ‘THIS IS NOT A TAX INVOICE’. If after you have issued such an invoice, you actually supply the goods or services to your customer, or receive payment, then you must issue a proper tax invoice.

A15: Recovery of an expense that a registered person incurs as a principal from another party is a reimbursement. A reimbursement is a supply and subject to GST. A registered person must fulfil all the following criteria:

(a) Incur expenses as principal;

(b) Entitle to claim input tax credit;

(c) The client is not the recipient of the supply (invoice is in the principal’s name);

(d) The principal is the person responsible to pay for the supply;

(e) The payment is not authorised by the client;

(f) The client has no knowledge that the supply is made by a third party;

(g) The principal has the right to alter or add on the value of the supply;

(h) The payment is for the supply made to the client.

 

The recovery of a payment made by registered person on behalf of another party as an agent is termed as a disbursement. A disbursement does not constitute a supply and hence, is not subject to GST. Payment to third party or on behalf of the principal will be treated as disbursement if the registered person fulfils all the following criteria:

(a) Incur expenses as an agent acting on behalf of the client;

(b) The client is the recipient of the supply (invoice is in the client’s name);

(c) The client is the person responsible to pay and claim input tax credit;

(d) The payment is authorised by the client;

(e) The client knew that the supply is made by a third party;

(f) The exact amount is claimed from the client and the agent has no right to alter or add on the value of the supply;

(g) The payment is clearly an additional to the supply made to the client.

A16: Yes, if the exempt supply is incurred for business purpose, the reimbursement, even though it’s an exempt supply will be subjected to 6% of GST.

A17: Paragraph 38 of the GST Regulations 2014, provides that if a registered person did not claim his input tax in the taxable period in which he holds a tax invoice, the Director General may allow him to claim the input tax within 6 years from the date of supply to or importation by him.

For the purpose of claiming input tax in accordance with paragraph 38(4)(a) of GST Regulations 2014, a taxable person is considered to hold a tax invoice on the earlier of:

(a) the date or time of posting the tax invoice into the company’s Accounts Payable; or

(b) one year from the date he holds the tax invoice

A18: The time of supply is the time when a supply of goods or services is treated as being made. It is important to determine the time of supply because a taxable person must charge GST at the time when the supply is made. Consequently he accounts for GST for the taxable period in which the time of supply occurs. In the case of a supply of services, the time of supply is when the services are performed. A service is considered “performed” when work is done or completed by the supplier of services. If a supplier issues a tax invoice or receives any payment before the time of supply, the time of supply for the amount invoiced or payment received will be the date of the invoice issued or the amount of payment received, whichever is the earlier. If a supplier does not receive any payment before the basic tax point but issues a tax invoice within twenty one (21) days from the basic tax point, the time of supply will be the date of issuance of the invoice. This is regardless if any payment is received within the twenty one (21) day period. If a tax invoice is not issued within twenty one (21) days, then the time of supply will revert to the basic tax point. Basic tax point refers to the work done or completed by the supplier of services.

A19: Every registered person who makes any taxable supply of goods or services in the course or furtherance of any business in Malaysia shall issue a tax invoice to his buyer within 30 days from the date of payment made by the buyer on such supply (in full or in part).

A20: The transitional rule is applicable. If services are rendered before registering for GST, although invoice is issued on GST 1st taxable period, such invoice is not subject to GST.

A21: Input tax incurred by a taxable person in respect of the following supplies shall be excluded from any credit under GST:-

a) the supply to or importation by him of a passenger motor car;

b) the supply of goods or services relating to repair, maintenance and refurbishment of a passenger motor car.

c) any medical expenses incurred in connection with the provision of all forms of medical treatment to any person employed by a taxable person but does not include medical expenses incurred under the Employees’ Social Security Act 1969 and the Workmen’s Compensation Act 1952 where such expenses is obligatory under that Act or under any collective agreement within the meaning of the Industrial Relations Act 1967

d) any family benefits including hospitality of any kind provided by the taxable person for the benefit of any person who is the wife, husband, child, including adopted child in accordance with any written law or parents of any person employed by the taxable person.

e) entertainment expenses to a person other than employees or existing customers except entertainment expenses incurred by a person who is in the business of providing entertainment.

A22: There is a new GST Code which was recommended by Customs Department, specifically for such transaction, namely TX-NC. Any transaction using this code will not be declared in field 6a & 6b of GST-03 return.

A24: Gifts of goods to the same person in the same year where the total cost is not more than RM500 is not a supply.

A25: Deposit whether refundable or not refundable or in the form of security given in respect of any supply of goods or services, is not part of the consideration for the supply if it does not form part of the payment for the supply. Generally most deposit payments represent consideration, as the amount paid over is intended by the parties to the contract to be offset against the purchase price once the supply has been made. Such payments fall within the scope of GST and tax must be accounted for on receipt of the deposit.

A26:

a) When a registered person is making mixed supplies;

b) When a mixed supplier acquires capital asset for the purpose of making mixed supplies;

c) When the value of capital asset is more than RM100,000, excluding tax.

A27: GST for imported goods are declared and paid at the time of importation based on the invoice from the overseas supplier using customs declaration forms (Customs Form No. 1 or 9). These declaration forms together with the Customs Official Receipt (COR) will be sufficient for the purpose of input tax claim by the importer or buyer.

A28: It is accounted by way of the reverse charge mechanism.

A29: If the recipient is not a registered person and the imported services are consumed for the purpose of his business, he has to account for output tax and is not entitled to claim input tax.

A30: No, zero rated supply is considered as a taxable supply. Thus, provision of both supplies does not constitute to mixed supplies.

A31: This is considered as an out of scope purchases since supply of services are made by a person who does not belong in Malaysia other than the supply of imported services.

A32: Designated area means Labuan, Langkawi, or Tioman, whereby:
(1) ‘Langkawi’ means Langkawi Island and all adjacent islands lying nearer to Langkawi Island than to the mainland.
(2) ‘Labuan’ means the Island of Labuan and its dependent island viz. Rusukan Besar, Rusukan Kechil, Keraman, Burong, Papan and Daat.
(3) ‘Tioman’ means the Island of Tioman and the islands of Soyak, Rengis, Tumok, Tulai, Chebeh, Labai, Sepoi and Jahat.

A33: Supplies of services by a service provider in the designated area to Malaysia or from a service provider in Malaysia to the designated area are regarded as local supplies and such supplies are taxable and subject to tax under paragraph 156(b) of the GST Act 2014.

A34: Goods supplied from Malaysia to designated areas are zero-rated as stated in the Goods and Services Tax (Zero Rated Supply) Order 2014.

A35: Generally, supply of services made within or between designated areas, except for the supply of freight services between designated areas, is not subject to GST under section 155 of the GSTA 2014 provided that the supplier of the services belongs in the designated area. This means that there is no output tax imposed on such supplies.

A36: Yes, if the value of the taxable turnover within a period of twelve months exceeds the threshold of RM500,000.

A37: 

Yes, you may request to be exempted from registration subject to the approval of the Director General. The rationale of giving such an exemption is to provide an option to such a person whether to register or not for GST as his compliance costs may outweigh the benefits of claiming input tax credit.

The effect of the exemption from registration to a person making wholly zero-rated supplies is that the exempted person cannot claim input tax credit on any input tax incurred in furtherance of his business.

A38: You may apply for exemption from registration using GST-Adm11 form – “Application For Goods and Services Tax Registration Exemption”.