Malaysia GST Overview & Implementation

GST OVERVIEW & IMPLEMENTATION
BY FCA BUSINESS & TAX ADVISORY
The contents of this seminar have been developed on a general understanding basis and are not intended to suit any particular organisation without further
consulted professional advice. FCA Business & Tax Advisory Sdn Bhd (FCA), including its directors, employees, agents and entity controlled by or owned by or
associated © 2014 FCA Business with FCA, & Tax accepts advisory
no liability or responsibility on whatsoever loss, damage, expense or cost to any party resulting directly and/or indirectly from the
use, application and /or referral of this seminar materials and /or contents and/or the reliance by any party, either in part or in whole.
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GST GENERAL IMPLICATION
© 2014 FCA Business & Tax advisory
Your
Company
 By Fca business & Tax Advisory
Sale of goods to local customer
– Standard Rated
Input Output
Exportation
– Zero Rated
Commercial Rental
– Standard Rated
Advertising expenses
– Standard Rated
Import / local purchase of goods
– Standard Rated
Medical and personal accident
insurance
– Blocked Input Tax
Entertainment
– Standard Rated /
Blocked Input Tax
Interest expenses
(e.g. borrowings)
– Exempt
Service fee
– Standard rated
Sale of fixed asset (except
on blocked item)
– Standard Rated
Rental expenses
– Standard Rated / Exempt
Free gift (>RM500)
- Standard rated (deemed
supply)
Types of Supply Place of Supply Time of Supply Value of Supply

Zero-rated Supplies
• Includes:
• Exports - goods and services,
i.e. including international
services
• Agriculture products - rice and
fresh vegetables
• Foodstuff - rice, sugar, table
salt, plain flour, cooking oil
• Livestock supplies - live
animals, meat of cattle,
buffaloes, goat, sheep and
swine (fresh or frozen)
• Poultry - live and unprocessed
meat of chicken and duck
• Egg (fresh and salted) and fish
• Supply of the first 300 units of
electricity to domestic users
• Supply of treated water to
domestic users
Exempt Supplies
• Includes:
• Sale and lease of residential
property
• Financial services (including
life insurance and family
takaful)
• Toll highway
• Private health and education
• Domestic transportation of
passengers for mass public
transport by rail (KTM, LRT,
ERL, Monorail, ships, boats,
ferries, express bus, state bus,
worker bus, school bus, feeder
bus and taxi)
• Land for agricultural purposes
and land for general use
(Government building and
burial ground)
Out-of-Scope Supplies
• Includes:
• Supplies:
• Not made in Malaysia
• Not made in the course or
furtherance of a business
• Made by a person who is not
registered
• Transfer of business as a
going concern
• Sales of imported goods within
bonded warehouses (except
last sale)
• Supplies and services by
Government, Statutory Bodies
and Local Authorities (except
certain prescribed services)
TYPE OF SUPPLIES

TYPE OF SUPPLIES
(Standard-Rated Supply)
Supplier 1
Price: RM 10
GST: RM 0.60
Tax remitted to Customs
Output tax = RM 0.60
Total amount remitted to
Customs = RM 3.60
Supplier 2
End Consumer
Price: RM 50
GST: RM 3.00
Price: RM 60
GST: RM 3.60
Input tax Claim= RM 0.60
RM 2.40
Input tax Claim= RM 3.00
RM 0.60
GST @ 6%
Your Company

TYPE OF SUPPLIES
Taxable Supply
Standard Rated 6%
Zero Rated 0%
Non-Taxable
Supply
Exempt Supply No GST
Out-Of-Scope Not a Supply
How do you ensure
compliance?
• Get a GST Certified Consultant to advise proper tagging of
tax code to supply
• Using GST Certified Software to tag GST tax code to
supply instead of using manual or non-certified software
• Mixed Supply business is advisable to go for Grade A GST
certified software

PLACE OF SUPPLY - GOODS
• If the supply is made outside Malaysia, GST will not be charged on the supply
• If the supply is into Malaysia, GST is charged at point of importation
From Location Final Location Place of Supply Subject to GST ?
Malaysia Malaysia Made in Malaysia Local delivery of goods in
Malaysia is subject to GST at 6%
Malaysia Japan Made in Malaysia Export of goods from Malaysia
qualifies for zero-rating
Japan Malaysia (your company is the
importer in custom document)
Made Outside Malaysia
(from the perspective of the
supplier)
Goods imported into Malaysia
subject to GST at 6%
China Japan Made Outside Malaysia Drop-shipment of goods outside
Malaysia is out-of-scope
From and Final Location Movement of the Goods
e.g.

PLACE OF SUPPLY - SERVICES
Place of Suppliers Belonging
• Treated as in the country where the supplier belongs
• Supplier belongs in Malaysia, every supply of services provided within the
scope of GST
SUPPLIER OF SERVICES BELONGS ?
MALAYSIA OTHER
COUNTRY
Business / Fixed
Establishment
YES NO Supplier belongs in Malaysia
Usual place of residence YES NO Supplier belongs in Malaysia
Business / Fixed
Establishment
YES YES Supplier belongs in Malaysia if the
supply of the business is most
directly concerned with Malaysia

PLACE OF SUPPLY
 Many more rules and regulation might be implicating the businesses:
 Supplies to/from designated areas (e.g. Langkawi, Labuan and Tioman)
 Supplies through e-commerce (e.g. goods, digital products and services)
 Place of supply of services
 Concept of permanent establishment
 Importation of services into Malaysia (Reverse Charge Mechanism)
 Supplies covering region basis (inside and outside Malaysia)
 and others

PLACE OF SUPPLY
How do you ensure
compliance?
• Get a GST Certified Consultant to advise tax treatment of
various sale transactions in different scenario
• Using GST Certified Software to tag GST tax code to
transactions instead of using manual or non-certified
software to minimize human errors
• Provide GST training to accounting staffs to equip with GST
accounting knowledge and skills

TIME OF SUPPLY
The time when a supply of goods or services is treated
being made
• Important to determine when to account for GST
• To account and pay GST output even payment not yet received from
customers
General Rule
In most cases, time of supply shall be the earliest of the following:
1. Basic Tax Point
• For Goods – at the time of removal/delivery
• For Services – at the time of services performed
2. Tax Invoice is issued
3. Payment is received

TIME OF SUPPLY
Goods delivered Tax inv issued Submit GST return &
on 20.12.15 19.01.16 pay GST 31.01.16
31.
Inv issued
> 21 days Pay # later than
Time of supply 30.09.15
& Basic Tax Point Actual Tax Point
Assumptions :
• accounting basis = invoice basis
• quarterly submission
• the quarter taxable period = Oct 15 – Dec 15
• last day of submission & pyt for the above taxable period = 31.01.16

TIME OF SUPPLY
Goods Delivered Tax inv issued Submit GST return &
on 20.12.15 09.01.16 pay GST 30.04.16
31.
Assumptions :
• accounting basis = invoice basis
• quarterly submission
• the quarter taxable period = Oct 15 – Dec 15
• last day of submission & pyt for the above taxable period = 31.01.16
Inv issued
< 21 days Pay # later than
Time of supply & 30.09.15
Basic Tax Point Actual Tax Point

TIME OF SUPPLY
 21 days rule
 Continuous supplies spanning over a period
 Consignment goods
 Coins operated machine
 Imported services
 Cash flow issues and credit terms
 and others

TIME OF SUPPLY
How do you ensure
compliance?
• Get a GST Certified Consultant to advise correct time of
supply to account GST and prepare cash flow planning
• Using GST Certified Software which helps automate
process on time of supply to account GST in right taxable
period

VALUE OF SUPPLY
Value on which GST is chargeable
• Amount of GST is the value multiplied by the tax rate- 6%
Consideration
“106%”
Value of Supply
“100%”
GST Amount
= + “6%”

VALUE OF SUPPLY
 Consideration wholly in money
 Consideration partly in money and in kind
 Consideration wholly in kind
 Supply with no consideration
 Supply to connected persons
 Value of imported goods/services
 and others

VALUE OF SUPPLY
How do you ensure
compliance?
• Get a GST Certified Consultant to assess impact of GST
treatment on various transactions
• Using GST Certified Software which helps capture correct
amount of GST

GST ADMINISTRATION AND REPORTING
Annual Turnover Taxable Period
RM 5m and above  Monthly (1 month)
Less than RM 5m  Quarterly (3-month)
GST payment and GST return forms are to be submitted:
 within 1 month after the end of the “Taxable Period”.

GST Audits
GST law operates on a “Self-Assessment” System.
 The Registered Person is responsible for his / her own GST reporting, and must
ensure the correct amount of GST is paid.
 Customs officers will conduct GST audits on the Registered Person to verify the
accuracy of the GST return form or GST amount paid.
GST audits can be conducted within 6 years
However, there is NO time limit for cases involving fraud / wilful default.

 Bad debt relief/recovered adjustments
 Unpaid suppliers invoices adjustments
 Blocked input tax
 GST Transitional provision
 Long term contracts (spanning over 1st April 2015)
 Record keeping requirements
 and others

How do you ensure
compliance?
• Get a GST Certified Consultant to get GST the FIRST time
• Using GST Certified Software which helps automate
process, reduce workload and minimize human errors

GST PENALTIES
• A fine not less than RM1,500 and not exceeding
RM20,000
Penalty for late
registration
• A fine not exceeding RM50,000 or imprisonment not
exceeding 3 years; or BOTH; and
• A penalty equal to the undercharged tax
Penalty for incorrect
return
• 1st offence – a fine of 10-20 times of amount of tax or
imprisonment not exceeding 5 years; or BOTH
• 2nd offence- a fine of 20-40 times or imprisonment
not exceeding 7 years; or BOTH
Penalties for evasion
of tax

GST IMPACT TO BUSINESS
Business
Efficiency
GST
Sales &
Marketing
Procurement
Human
Resource
Finance &
Accounting

Businesses may be impacted by the followings :-
a) Business efficiency
 less competitive as a result of application of wrong category of supply, ie
standard rated supply instead of zero and out of scope supplies.
 additional work flow and paper work
b) Sales & Marketing and Procurement
 equip sale staff with well awareness on the vitality of time of supply / tax
point
 aware of GST impact on sale transactions/contracts (ie, forward sale)

c) Finance & accounting
 establish a friendly and an effective credit control system in order to alleviate
cash flow
 able to identify Blocked Input Tax, claim the correct input tax
 ensure timely accounts processing and closing

d) Human Resources
 staff are well trained and prepared
 Exercise effective implementation by stages with proper division of responsibility
e) Information technology
 use of right and suitable accounting software and/or any IT to automate the
processing/reduce work load
 Use of technology to reduce human errors

THANK YOU
Contact :
FCA Business & Tax Advisory SB
www.egst.com.my
enquiry@egst.com.my
fam@egst.com.my
alan@egst.com.my
guomiao.eng@egst.com.my

Malaysia GST Overview & Implementation

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