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1. GOODS & SERVICES TAX (GST) MALAYSIA

2. OVERVIEW
• Latest GST Developments
• The Basics of GST
• Registration : Liability to register, when to register and how
• GST Impact and Considerations
• Actions To Be Taken
• GST

3. 2014 Budget Announcement:
1) GST shall replace the current Sales and Service Tax effective 1 April 2015
2) GST shall be charged and levied on any supply of goods and services made in
Malaysia and any importation of goods into Malaysia
3) GST will NOT be imposed on basic food items, piped water supply,
transportation services, first 200 units of electricity, health, education,
sales/purchase/rental of residential properties and services provided by
government etc.
4) Proposed GST standard rate is 6%.
5) Threshold for registration is annual taxable turnover exceeding RM500,000
LATEST GST DEVELOPMENTS
Page 3

4. 2014 Budget Announcement (con’t):
6) Further deduction to be given for expenses incurred on training in
accounting and ICT for GST in respect of years of assessment (YAs) 2014 and
2015.
7) Training grant of RM 100 millions will be provided to businesses who send
their employees for GST courses for YAs 2014 and 2015.
8) Financial assistance amounting to RM 150 millions is provided to SMEs for
purchase of accounting software.
LATEST GST DEVELOPMENTS
Page 4

5. Page 5
Scope of GST
GST is imposed on
• Supply of goods and services in the country
• Import of goods into the country
• Import of services (reverse charge
mechanism)
Supply:
• Takes the form of tangible goods and
intangible services e.g. grants, assignment;
• Anything that is not a supply of goods will be
treated as a supply of services.
GST
Import of Goods
-physical
movement of goods
into Malaysia
Import of Services
- reverse charge
Supply of
Goods or Services
in Malaysia
- belonging concept
i.e. where the
supplier is located

6. Page 6
Scope of GST (cont’d)
Charging and Collection of GST
Importation of Goods into
Malaysia
GST is collected by
the supplier who is
registered with Customs
GST is
charged on
Supply of Goods or Services in
Malaysia
Goods or Services
supplied by local supplier
GST is collected by Customs
at the point of importation

7. THE BASICS OF GST

8. Attribute Sales and Services Tax (SST) Goods and Services Tax (GST)
Scope
• Manufactured in Malaysia, or acquired
under the provisions in Sales Tax Act
• Imported into Malaysia by any person for
home consumption
• Categories of taxable person in certain
groups (e.g. hotels, restaurants, private
hospitals etc.)
• Any supply of goods and services
made in Malaysia, including
anything treated as a supply under
the GST Act; and
• Any importation of goods into
Malaysia
Stage • Single stage • Multi-stage
Threshold
• Sales Tax- annual sales turnover
exceeding RM 100,000
• Service Tax -various annual sales
turnover thresholds (RM100,000, RM
300,000, RM 3 million)
• RM 500,000 of annual taxable
turnover
Rates
• Sales Tax (5%, 10% and at a specific
rate)
• Service Tax is at 6%
• Proposed GST rate is at 6%
THE BASICS OF GST
Differences between Sales/Services Tax and GST
Page 8

9. Types of Supply
Categories of Supply Examples of Supply
Standard Rated
(Taxable Supply)
Local supply of goods / services, supply of land and building for
commercial, administration or industrial purpose, construction of all
types of building
Zero Rated
(Taxable Supply)
Export sales / international services / basic foodstuff / agricultural
supplies
Exempt
(No GST)
Transport services, toll/highway, certain financial services / sales &
lease of residential land / property / agricultural land / private
health & education
Out of Scope
(No GST)
Transfer of business as going concern or sales of property outside
Malaysia, charges and fees imposed by the Government
• Businesses providing exempt supply will not be entitled to claim the input GST incurred.
THE BASICS OF GST
Page 9

10. THE BASICS OF GST
The Basic GST Process
Refundable
by Customs
Net GST
Payable
to Customs
Less
Input Tax
Output Tax < Input Tax
(Negative)
Equals
GST collected
from customers
GST paid on
business purchases
Output Tax
Output Tax > Input Tax
(Positive)
Price = RM300
GST = RM18
Price = RM100
GST = RM6
Tax remitted
to Customs
RM18
RM6
RM12
Price = RM100
GST = RM6
Price = RM150
GST = RM9
Tax remitted
to Customs
RM6
RM9
-RM3
Page 10

11. Payment to Customs
Supplier
Sale Price = RM530 (inclusive of GST)
Sales Price (Before GST)
Wholesaler
Sale Price = RM1,590 (inclusive of GST)
Consumer
Payment to Wholesaler= RM1,590
Price = RM1,000
Proposed GST rate = 6%
By Consumer
GST paid = 90
Manufacturer
Sale Price = RM1,060 (inclusive of GST)
Price = RM500
Price = RM1,500
By Wholesaler
GST collected 90
Less: GST paid 60
GST payable 30
By Supplier
GST collected 30
Less: GST paid 0
GST payable 30
By Manufacturer
GST collected 60
Less: GST paid 30
GST payable 30
THE BASICS OF GST
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12. REGISTRATION : LIABILITY TO
REGISTER, WHEN TO REGISTER AND
HOW

13. WHO IS LIABLE?
Taxable person [Clause 2 of GST Bill]
 any person who is or is liable to be registered under this Act;
 Person include individuals, sole proprietors, partnerships, corporations, clubs, associations,
societies, trusts and other unincorporated bodies, Federal and State government bodies and local
authorities AND
Business [Clause 3 of GST Bill]
 Includes any trade, commerce, profession, vocation or any other similar activity, whether or not it
is for a pecuniary profit
 Includes activities of clubs, associations and societies
Page 13

14. Page 14
GST Registration – 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
- Historical turnover (based on turnover of current month and the preceding 11 months) OR
- 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
* Please note that penalties of RM50,000 and/or up to 3 years imprisonment will be imposed for
non compliance.

15. GST REGISTRATION – FORMS OF REGISTRATION
Forms Explanation
Voluntary Registration
[Clause 24]
• Business below threshold (RM500,000) may apply for voluntary registration
• Once registered shall remain to be registered for at least 2 years
Group Registration
[Clause 27]
• Facility to allow related companies to account GST in group
• Each company:
 must be registered individually prior to group registration
 must make wholly taxable supplies
• Nominate a member to be a representative member
• Taxable supply between members being disregarded
• Representative member is responsible for completing & rendering the single
return on behalf of the group
• All members are jointly & severally liable for any tax due & payable by the
representative member
Control : Either directly or indirectly holding > 50% of the issued share capital of
the other company (Incudes Individual and partnership)
Page 15

16. GST Registration
• GST registration is essential for the purposes of
submission of GST return, payments, correspondence
etc
• Upon fulfilling GST requirements, the co would have to
make an application for GST using prescribed form GST
– 01
• Customs office will issue letter of approval together
with the registration no to the applicant
Page 16
ACCOUNTING FOR GST – REGISTRATION

17. Group GST Registration
• GST registration is a facility that allows two or more
related companies to register as a group
• Group registration may be relevant to the group
considering the substantial number of subsidiaries
under its control;
• The group would have to make the application using
prescribed form GST – 02
Page 17
ACCOUNTING FOR GST – REGISTRATION

18. Registration for Joint Ventures
• Registration for joint venture for GST purpose only
applies to petroleum upstream activity under the
Production Sharing Contract (PSC).
• This may be relevant for certain JVs assuming that
there are existing and/or future projects under a Joint
Venture commitment/scheme.
• JVs would have to make the application using
prescribed form GST – 02 and GST – 02A.
Page 18
ACCOUNTING FOR GST – REGISTRATION

19. GST Return
• GST return is a statement used to account for the tax
to the Customs Dept
• The form is essential to enable any input tax to be
claimed from Customs Dept.
• The GST return is required to be furnished to the
Director General not later than the last day of the
month following the end of taxable period
• Cos would have to make an application for GST using
prescribed form GST – 03
Page 19
ACCOUNTING FOR GST – FILING OF RETURNS

20. ACCOUNTING FOR GST – FILING OF RETURNS
Submission of Tax Return
• A registrant needs to account for GST charged and GST paid
on the taxable supplies made by him in each taxable period
• A registrant is allowed to set off input tax paid on his
purchases against GST charged on his taxable supplies
• GST returns and payments must be submitted not later than
the last day of the month following the end of the taxable
period (Annual sales >RM5 mil –monthly, <RM5 mil –quarterly)
• Electronic filing is encouraged
• Late filing: Penalty at 5% (within 30 days), additional 5% (31
to 60 days) and 3% for every 30 days thereafter up to a
maximum of 25%
• Incorrect return: Penalty of RM50,000 and/or up to 3 years
imprisonment
• Liability to Keep Records: All business and accounting
records relating to GST are to be kept in Bahasa Malaysia or
English for a period of 7 years
Page 20

21. WHO IS LIABLE? [Clause 103]
• The following shall be deemed to be guilty of a GST
offence:-
…director, partner, manager, secretary or other
similar officer of the company, firm, society, association
or other body of persons…
• unless, he proves -
a) that the offence was committed without his
knowledge, consent or connivance; and
b) that he took all reasonable precautions and had
exercised due diligence to prevent the commission of
the offence.
Page 21

22. GST IMPACT AND CONSIDERATIONS

23. Page 23
GST impacts ALL aspect of BUSINESS
GST
Finance &
Administration
Purchasing &
Procurement
Information
Technology
Quality
Assurance &
Production
Human
Resource
Legal,
Compliance
&
Governance
Sales &
Marketing

24. Page 24
Construction & Engineering
Some examples of Divisions:
Sales & marketing
Admin
Accounts & Finance
Legal Department
- procurement, suppliers
- sales and marketing, after-sales service,
- admin, HR, training, employee claims, benefits
- account payable & receivable, treasury, management
reporting, capital expense, taxation, budget
- long term contracts, warranty and etc.
•Identification and classification of work streams by inputs and outputs
GST Considerations

25. Page 25
GST Considerations – Common GST Issues
Managing Transitional Issues
(agreements executed before but straddle past 1 April 2015)
(stock in trade acquired before 1 April 2015)
GST Treatment?
Accounting System
• Modification to existing accounting system to be
GST ready?
Provision of mixed supplies
•Apportionment of input tax?
Bad Debts
• GST treatment?
Discount
• GST treatment?
Invoice & Record keeping
•Existing vs new sets of documents?
Supply – taxable, place, time, value?

26. Page 26
GST Considerations –Input / Output Taxes
Claim/charge of input/output taxes
[local and overseas suppliers]
Discounts “Gift Rule”
JV Agreements
• To be reviewed – during the transition period?
Long Term Contract
To be reviewed – during the transition period?
Stock
•Consignment?
Hire Purchase/
Leasing
• GST treatment?
Approved Trading Schemes
•What is available?

27. ACTIONS TO BE TAKEN

28. ACTIONS TO BE TAKEN
• Suggested actions be taken:
• People
 Establish a GST implementation Team from the sales and marketing, purchasing /
procurement, legal and compliance, finance / taxation, IT, HR etc.
 Conduct internal GST training
• Technology
 Review all IT systems
– Adequate collation capability for GST reporting and inventory management
– Relevant fields are available in ERP system (e.g. GST category for input and output, time
of supply, monthly GST return etc.)
– Able to cope with peculiarities in business transactions (e.g. consignment stock,
discounts, etc.)
Page 28

29. ACTIONS TO BE TAKEN (con’t)
• Process
 Review internal processes
– Record keeping (eliminate manual processes, tax invoice format etc.)
• Documentation
 Contract review, vendor/supplier review, accounting entry and cash flow management
Page 29

30. TYPICAL BDO GST IMPLEMENTATION PLAN
PRE – PROJECT
PLANNING
STAGE 1 STAGE 2 STAGE 3
Start Dec 2013
(2 weeks)
Dec 2013- Jan 2014
(2 months)
Feb 2014 – May 2014
(4 months)
June 2014 – Oct 2014
(5 months)
 Agree detailed project
plan which best fit
into the company’s
business model and
timetable for
implementation
 Request for
information
 Preliminary interview
and use of
questionnaires
 Analysis of documents,
diagnosis, further
verification and
clarification
 Gap analysis
 High level report
 Data verification and
gap analysis (based on
final GST legislation)
 Mapping exercise
 GST Help desk
 GST Implementation
advisory strategy
report
 Implementation
 Registration
 Policies & procedures
 Proposed trial/parallel
run
 Assist with registration
and guidance on the
completion of forms
(review of first 3 GST
returns)
 Training
Pre – project
planning
Stage 1
Impact Study
Stage 2
Mapping
Exercise,
Data
Verification
Stage 3
Implementation
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31. Page 31
IMPLEMENTATION OPTIONS
• Full project management
• Active involvement and joint partnership in implementing GST
• Regular monitor of implementation progress as a subject matter expert
• Ad hoc assistance as and when required

32. Please contact David Lai
at 03-2616 2978 or davidlai@bdo.my
for further information or assistance.