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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.
(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.
(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.
(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.
(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.
Q6: Is tax invoice issued to and reimbursed by the employees of a Company on mobile phone bill expense be allowed for claiming of input tax?
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.
Q7: My Company become registered for GST in March 2017. I had incurred plant and machineries in June 2016. Is my Company eligible to claim for input tax on such assets?
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.
Q9: Can I claim input tax on the services incurred in relation to the capital goods purchased before registering for 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.
Q11: What are the criteria that must be presented in simplified tax invoice for claiming of input tax?
(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.
Q17: If I does not claim the input tax in the taxable period, in which I hold the tax invoice, will I still be allowable to claim later on?
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.
Q19: What if I receive payment upfront for supply of goods and services? What is the time of supply?
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).
Q20: My Company becomes GST Registered in October 2016, and I am issuing invoices for services rendered in September 2016 in October 2016. Am I supposed to issue GST for such services?
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.
Q22: What if the GST is claimable in a Company but the Company does not wish to claim the input tax incurred?
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.
A23: He must apply in writing to the DG for his approval.
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.
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.
Q29: If I am not a GST Registered Company and I incur imported services, will these services subjected to GST?
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.
Q33: My Company is located in Kuala Lumpur and is providing services to a Company in Langkawi. Should this service be charged with GST?
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.
Q34: My Company is located in Kuala Lumpur and is supplying goods to a Company in Labuan. Should this supply of goods be charged with GST?
A34: Goods supplied from Malaysia to designated areas are zero-rated as stated in the Goods and Services Tax (Zero Rated Supply) Order 2014.
Q35: My Company is located in Labuan and is providing services to a Company in Langkawi. Should this service be charged with GST?
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.
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”.
Q39. What are the documents required if my Company is exporting goods via air mode in order to qualify as a zero rated supplies?
A39. Airway bills and Consignment Notes received from forwarding agent.
Q40. When is it necessary to obtain K2 Form for export of goods in order to qualify as a zero rated supplies?
A40. When the goods are exported via sea mode.
A41. You may submit only if your Company has registered as a forwarding agent with Customs Department.
A42. Subject to Section 90 of Customs Act 1967, at least 51 percent bumiputera participation on share capital, management and employee is required.
- under a contract with a person who belongs in a country other than Malaysia; and
- which directly benefit a person who belongs in a country other than Malaysia and who is outside Malaysia at the time the services are performed;
But not including:-
- the supply of right to promulgate an advertisement by means of any medium of communication; and
- the promulgation of an advertisement by means of any medium of communication; or
- supply of services directly connected with a land situated in Malaysia or any improvement of such land, goods are in Malaysia at the time services are performed and capital market products
Q45. What if my Company chooses not to claim input tax for certain expenses? Are there any implications?
A45. Any input tax unclaimed will not be treated as tax deductible.
A46. ZP is previously known as zero-rated purchases. Commencing 08 March 2018, this refers to goods and services purchased from GST registered suppliers whereas GST is charged at zero-rated or not subject to GST. This purchases are including;
- zero-rated purchase as prescribed in GST (Zero-Rated Supply) Order 2014.
- an exempt supply are prescribed in GST (Exempt Supply) Order 2014.
- purchase of goods which given relief from charging and payment of GST. Example for this tax code are purchase of RON95 petrol, diesel and other relief supply that been given relief from GST as prescribed under GST (Relief) Order 2014.
- purchase transactions which disregarded from charging and payment of GST under GST legislations. Examples, purchase within GST group registration, purchase made within a Warehouse Scheme & others disregarded supplies and etc.
A47. The example acquisition of out of scope purchase are such as non-business purchase, purchase of services made by a person who does not belong in Malaysia other than the supply of imported services, and purchase from the government supply except selected government supplies prescribed in the GST (Application To Government) Order 2014.
A48. No, This tax code applicable for any adjustment made to Input Tax such as Bad Debt Relief, & other input tax adjustments relating to longer period adjustment and repayment of outstanding invoices to supplier. This tax code shall not be used for issuance of credit or debit note.
A48. No, This tax code applicable for any adjustment made to Output Tax such as bad debt recovered, & other output tax adjustments relating to longer period adjustment, and outstanding purchase invoices more than 6 months. This tax code shall not be used for issuance of credit or debit note.
Q50. I am supplying goods to my customers from Malaysia to Pulau Langkawi. What GST Tax Code should I apply?
A51. The supplier has to declare the value of this export under Field 11: Total Value of export supplies of GST- 03 return.
Q52. Commencing 08 March 2018, zero rated tax codes were splitted into 3 Categories, ZRL, ZDA and ZRE. Under what circumstances should I use ZRL and ZRE?
A52. ZRL is applicable for zero-rated supply as prescribed in GST (Zero-rated Supply) Order 2014 for local supplies. The examples for zero- rated supply in First Schedule-Supply of Goods Determined as Zero-rated Supply are as follows:
- Zero-rated supply of goods of any of the descriptions as in Appendix (Zero- rated Supply) Order 2014 based on tariff code in such as milled-rice, fresh fruit, and live animals (cattle, buffalo, goat, sheep and swine),
- Medicaments and medical gases in the National Essential Medicines List issued by the Ministry of Health and approved by the Minister and put up in measured doses or in forms of packaging for retail sale,
- The supply of treated water by a person who is licensed under the Water Services Industry Act 2006 [Act 655] to domestic consumers irrespective of minimum or non-usage,
- The supply of raw materials and components made to a person who belongs in a country other than Malaysia for the treatment and processing of goods by any taxable person under the Approved Toll Manufacturer Scheme, and etc.
ZRE is applicable for supply of goods that qualify for zero-rate if the movement of goods is supported with Customs No.2 Form (K2) which stated the supplier’s name and address as the consignor and the recipient’s name and address in overseas recipient as the consignee. Besides that, the supply of services will fall within the description of zero-rated if the services is attach with supporting documents such as invoice for an international services. Examples includes sale of air-tickets, and international freight charges. Please refer to GST (Zero-Rated Supply) Order 2014 for detailed list of zero rated supplies.
A53. The supplier has to declare the value of this zero- rated supply under field (10) of GST-03 return for ZRL.
The supplier has to declare the value of this export under Field 11 of GST-03 return for ZRE.
A54. Payment of employee’s (For example: employee’s salary, allowance, bonus, employee’s monthly contribution to Pension, Provident, and Social Security Fund) by company to the employee is not treated as a supply. It is advisable not to assign a tax code for the expenses. The company may use General Ledger (GL) account code to differentiate every type of the employee’s expenses.
Q55. What is the tax code for Credit Note/Debit Note, for example a goods return due to several reasons such as quality issue or damage?
A55. The tax code for Credit Note/Debit Note shall refer to the original supply and must contain the number and date of the original tax invoice. For example, due to damage of an item being supplied, if an original supply tax invoice’s item is “SR”, then the item in a Credit Note’s/Debit Note’s also apply “SR” as the item tax code, and GST need to be adjusted accordingly.
A56. Subsection 36(1) of GST Act 2014 states that every taxable person shall keep full and true records written up to date of all transactions which affect or may affect his liability to tax, including all other records as the Director General may determine. GAF is part of the record that is required by RMCD to be kept by registered person. For the time being, it is not a compulsory document to be produced by registered person. However, to avoid any difficulties in future, you are highly recommended to produce GAF for audit and refund verification purposes.
Q57. It is compulsory for wholly taxable supplier and mixed supplier to declare the total amount of incidental exempt supplies (Tax code: IES) in Field 12 of the GST-03 return?
A57. Yes. Incidental exempt supplies or ‘IES’ such as foreign exchange gain, fixed deposit interest shall be declared in Field 12: Total Value of exempt supplies in the GST-03 return. For example, if the forex amount is net gain, then the value must be declared in Field 12 of GST-03 return. If the forex amount is net loss, then you are not required to declare it in Field 12 of GST-03 return.
Q58. What are the type of transactions or supplies that should be included in item 15 of GST-03 return?
A58. The type of transactions or supplies that should be included in the item 15 of the GST-03 return are as follows:
|SUPPLIES||PROPOSED TAX CODE|
|Supplies where tax is not chargeable||NTX|
|Supplies under Approved Jeweller Scheme (AJS)||SR-JWS|
|Supplies made outside Malaysia or not within the scope of GST||OS-TXM, OS|
A registered person is also strongly advised to include other transactions into item 15 of GST-03 return, where it involved payments that are received from another party or are treated as an income to the business. Example of such transactions includes:
- Refundable deposit;
- Contribution*, donation*, grant*, sponsorship* or compensation received from another party (i.e not amount to a supply due to no benefits in return to the donor);
- Transactions which are treated as neither a supply of goods nor services under Second Schedule of GST Act 2014 except payment or contribution made to the pension, provident or social security fund (e.g. EPF, SOCSO etc.).
Proposed tax code for the above transactions is OS.
Q59. What are the type of transactions or supplies that should not be included in item 15 of the GST-03 return?
A59. A Registered Person is not required to include the following transactions into item 15 of the GST-03 return, where it involved payments that are made to another party or are treated as expenses to the business. Example of such transactions includes:
- Goods given for free and cost to the donor is less than RM500;
- Payment / contribution made to EPF or SOCSO;
- Salary or allowance;
- Accounting transactions for example depreciation, classification of accounts and etc.
Proposed tax code for the above transactions is NS.
Q60. I purchased a SOHO unit which was used for residential purpose from the previous developer. I am using this SOHO unit for operation of business. If I am selling my SOHO unit to another person later on, will this supply be an exempted supply or commercial supply?
A60. Sub sale or second hand sale of commercial residential premise will be subjected to GST at standard rated when the usage of that premise was originally used for a commercial activity at the time when the supply is made.
Q61. I purchased 3 units of SOHO from previous developer which were used for residential purpose. I am renting all 3 units out. 2 of the tenants uses the units for residential purpose, whereas the other one uses the unit for operation of business. What is the GST treatment for these 3 SOHO units?
A61. Any lease, tenancy or rent of commercial residential premise is a supply of service. If a commercial residential premise is for residential purpose, the supply is an exempt supply. On the other hand, if any lease, tenancy or rent of commercial residential premise is for commercial purpose, it is subject to GST at standard rate.
A62. “Commercial residential building or premise” means any multilevel strata title building developed on a commercial land for the purpose of either commercial or residential namely:
- small office home office (SOHO),
- small office flexible office (SOFO),
- small office virtual office (SOVO),
- serviced apartment,
- commercial suite, or
- any other building of similar nature.
Q63. I am collecting deposit from my tenant for renting of homestay for a short term period. This deposit is a non-refundable deposit. Will this deposit be subjected to GST?
A63. Forfeited deposits/ booking fees is not considered as a supply but as a penalty and is therefore not subject to GST.
Q64. My Company earns interest income from placement of fixed deposit with a Bank. What tax code should I apply?
A64. IES. Previously, these code was named as ES43.
A65. The supplier shall declare the value of this incidental exempt supply under Field 12: Total Value of exempt supplies of GST-03 return.