ELEMENTS AND SCOPE OF GST

WHAT WE HAVE LEARNT LAST WEEK?

Wholesaler

Price: RM30GST: RM 1.80

Tax remitted to Government

Output tax = RM 1.80

Total amount [ 1 + 2 +3] remitted toCustoms = RM 3.60

Retailer

Consumer

Price: RM50GST: RM 3.00

Price: RM60GST: RM 3.60

Output tax = RM 3.00Input tax = RM 1.80

RM 1.20

Output tax = RM 3.60Input tax = RM 3.00

RM 0.60

GST @ 6%

How GST Works? Standard-Rated

Consumer pays

6%GST only

Manufacturer

Assumption: GST 6 %

2

1

3

Kadar Standard

Pengilang-Tuntut kembali GST

Pemborong -Tuntut kembali GST

Peniaga -Tuntut kembali GST

Kadar GST dibayar adalah 6%

6%

Kadar Sifar

Kadar GST dibayar adalah 0%

0%

Pengilang - Tuntut kembali GST

Pemborong -Tuntut kembali GST

Peniaga - Tuntut kembali GST

Dikecualikan

Tiada GST yang dibayar

6% GST

Pembekal - Tuntut kembali GST

Peniaga - Tidak boleh menuntut kembali

GST

ELEMENTS AND SCOPE OF GST

1

4

3

2

Supply of goods and services

Taxable person

Business

Types of supply

SCOPE

SCOPE OF GSTLOCAL SUPPLY

TAXABLE SUPPLY

TAXABLE PERSON

MADE IN THE COURSE OR FURTHEREANCE

OF BUSINESS

IN MALAYSIA

IMPORT

TAXABLE GOODS

TAXABLE SERVICES

S.9(1)(b) GSTA

S.13 GSTA

Section 9 GSTA(GOODS AND SERVICES TAX ACT)

2014

SUPPLY

The importance of supply in GST

The mechanics of GST when considering whether certain transactions subject to GST or not:

↘ Supply:

↘ Taxable?↘ Non taxable?↘ Exempt?↘ Deemed supply?↘ Deemed non supply↘ Disregarded?↘ Out of scope?

↘ Place of supply↘ Time of supply↘ Value of supply↘ Thresholds/registration↘ Output/input tax

Meaning of supply (S.2 & 4)

Defines a supply of goods and services

Sec. 4 (1) GST Act:Means all forms of supply, including imported services, done for consideration and anything which is not a supply of goods is supply of services

Illustrates instances that can be regarded as a supply of goods or services

First schedule GST Act specified matters to be treated as

→ a supply of goods→ a supply of services

Treats matter not to be a supply for GST purpose

Second Schedule GST Act Neither a supply of goods nor a supply of

services

Meaning of Supply

To serve, to furnish, to provide something (general meaning)• In the case of goods – transfer of title or ownership, outright

cash or credit sale, hire purchase, etc• In the case of services – the provision of services

Anything done for consideration• Sale, barter, exchange, license, rental, lease right to use,

gifts or disposition• Linked to the supply• Everything received in return for the supply of goods or

services (in monetary or non-monetary terms)

SUPPLY

A supply ifDone for ‘consideration’

Consideration (Section 2 GST Bill)

“any payment made or to be made, whether in money or otherwise, or any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, supply of goods or services, whether by the person or by any other person:

Provided that a deposit, whether refundable or not, given in respect of the supply of goods or services shall not be considered as payment made for the supply unless the supplier applies the deposit is consideration for the supply”

MEANING OF SUPPLY

Certain transactions are treated as not a supply• Transfer of going concern (neither supply of goods nor

services)• Services provided for no consideration

Anything done with no consideration can be deemed to be a supply• Disposal of business assets• Business gifts (>RM500)• Private use of business asset

SUPPLY OF GOODSMeaning of goods (s.2)

Any kind of movable or immovable property exempt money in circulation as currency in Malaysia and other

Supply of goods (1st Schedule):→The transfer of the whole property in goods→The transfer of possession of the goods with agreement to

sell or to pass the property in the future→Default in payment under a security relating to land, the

transfer of the land is a supply of goods→Utilities→Transfer or disposal of business assets

SUPPLY OF SERVICES

Meaning of Services (s.2)Anything done or to be done including the granting,

assignment or surrender of any right or the making available of any facility or advantage but excluding goods or money

Supply of services (1st Schedule):→Anything which is done for consideration other than supply of

goods or money→The transfer of any undivided share of property or the transfer of

possession of the goods→Any treatment or process which is being applied to another

person’s goods is a supply of services→Goods for business used put for private use or any non business

purpose→Supply of service with no consideration to connected persons

Scope of SupplyBusiness activity

SupplyNot a supply

Consideration

Deemed supply

Deemed not a

supply

Supply

Outside the scope of Supply

No

No

NoYes

Yes

Yes

Supply for GST

GOODS USE FOR NON BUSINESS –

WHETHER OR NOT FOR

CONSIDERATION

GOODS USE FOR PRIVATE USE–

WHETHER OR NOT FOR

CONSIDERATION

SERVICES TO CONNECTED

PERSON WITHOUT

CONSIDERATION

TREATMENT OR PROCESS OF GOODS

TRANSFER OF UNDIVIDED

PROPERTY OF GOODSTRANSFER OF

PROFESSION OF GOODS

LANDSUPPLY OF

ELECTRICITY, WATER, GAS

TOGC

SUPPLY OF GOODS BY

SOCIETY TO MEMBERS OR

DONOR

GIFTCONTRIBUTION TO PENSION,

PROVIDENT OR SOCIAL SECURITY

FUND

SUPPLY OF MONEY

SUPPLY OUT OF GST SCOPE

SUPPLY WITHIN GST SCOPE

SUPPLY OF SERVICES

OTHER TRANSACTIONS

SUBSEQUENT SUPPLY OF

GOODS EXCLUDED FROM

ITC

SUPPLY OF GOODS

Supplies are within the scope of GST unless there is NO CONSIDERATION

Supplies with consideration is not in the scope of GST if:

• Neither a supply of goods or services

• Not take place in Malaysia

• Not made by a taxable person

• Not made in the course of furtherance in business

Supplies with no consideration is in the scope of GST if:

• In 1st Schedule

GST ON IMPORT

Imported service Importation of

goods

SUPPLY OF IMPORTED SERVICES

• Tax shall be charged to supply of services (include imported services) - S.9

• Meaning of “Supply” – includes imported services (s.4)• Meaning of “Imported services” (s.2):

Any services by a supplier who belongs in a country other than Malaysia or who carries business outside Malaysia

To a recipient who belongs in Malaysia; andThe services are consumed in Malaysia

• Supply of imported services (taxable) in the course or furtherance of business shall be treated as a supply made by the recipient (taxable person or non taxable person)

• Recipient must account output tax and can claim input tax (taxable person)

IMPORTED SERVICES

Accounting for GST – s.13 GTA

IMPORTED SERVICES

• Applies to taxable and non taxable person• The supply is taxable supply if made in Malaysia• For the purpose of business• Use reverse charge mechanism• Self recipient accounting

• Account for output tax on supply• Claim input tax for registered person. Non registered person

can’t claim input tax

• Time of supply• When the supplies are paid (s.13(4) GSTA)• A GST registered person however may account for output

tax based on the date of invoice if it is issued earlier than the date of payment. (Panel Decision 1/2014)

IMPORTED SERVICESPayment of royalty fees to overseas resident for the use of the services in Malaysia? The supply is treated as imported services by the recipient belonging in Malaysia and the value is tax exclusive

Example• Royalty fees charged by non resident business situated outside Malaysia from Jan – Dec 2016• Date of invoice 10 March 2016• Bank prevailing rate 10 March 2016

Calculation of GST:• Consideration for the supply @ RM2.50• GST to be accounted by recipient @6%

GST

Account GST output = RM30,000 Effect = 0Claim GST input = RM30,000

USD 200,000

RM2.50

RM500,000 + GST 6%500,000 x [6/100]RM30,000

IMPORTED SERVICES

Type of Person Tax Input Tax Claim Documentation

Taxable supplier Account Full ITC GST03

Mixed supplierAccount

Apportionment of ITC

GST03

Non Registered Person -Exempt Supplier -Below threshold GST No

GST04

Non Business No GST No No

Recipient in Designated Area (DA) No GST No No

IMPORTATION OF GOODS• Tax shall be charged and levied on any importation of goods (include

goods under a lease agreement – s.13(5) into Malaysia as if it were customs duty or excise duty and as if the imported goods are dutiable and liable to customs duty or excise duty. (s.9 (4) GSTA)

• Shall not be released from the customs control until the tax has been paid in full except as otherwise directed by DG. (s.52 GSTA)

• Value of goods imported shall be the sum (s. 16 GSTA) – value of the goods for the purposes of customs duty determined under

the Customs Act 1967; Amount of customs duty paid or to be paid; and Amount of excise duty paid or to be paid

IMPORTATION OF GOODS• Customs Act 1967 and Excise Duty 1976 shall apply with

regards to the exportation and importation of goods including in transit and the movement of goods under customs control. (s. 174)

• Inconsistency between the provisions of Customs Act 1967 and Excise Duty 1976, the GST Act shall prevail (s. 174)

IMPORTATION OF GOODS

Section 56 GSTA – POWER OF MINISTER TO GRANT RELIEF

• GST (RELIEF) ORDER 2014 1st SCHEDULE – Relief from payment GST (29 items)

• YDPA, Sultan, Federal or State Govt, Public and Private Higher Educational Institution, Private Charitable Entity for Disable, etc

2nd SCHEDULE – Relief from Charging GST (4 item)• Fund raising event, supply of land to the Govt/local Authority in

compliance of requirement for public amenities or utilities for no consideration, goods supplied at Duty Free Shop, goods or services supplied within JDA.

Paragraph 3 – Relief from payment GST on imported goods – goods listed in the GST (Zero Rated Supply) Order 2014

TYPE OF SUPPLY

TYPE OF SUPPLY

Taxable supply (s.2) standard rated supply (including disregarded supply) zero rated supply

Non taxable supply exempt supply out of scope supply

Non business supply Supply made outside Malaysia Supply below threshold Government supply – S.64 Supply by statutory bodies and local authorities with respect

to regulatory and enforcement functions – S.64

TAXABLE SUPPLY

TAXABLE SUPPLIES (S.2)

• GST charged on taxable supplies (s.9 GSTA).• A taxable supply, is a supply of goods or services made in

Malaysia, other than an exempt supply.

Standard rated or zero rated supplies Most local sales of goods and provision of local services are

standard-rated supplies.

disregarded supplies (supplies within group, supplies made in warehouse, supplies between venture operator and venturers and supplies between toll manufacturer and overseas principal)

Supplies made outside Malaysia which would be taxable supplies if made in Malaysia (s.24(2) GSTA)

TAXABLE SUPPLY Taxable supply:

Standard rated supply s.10 GSTA GST charged at standard rate 6% (GST (Rate of Tax) Order

2014) Supplier have to issue Tax Invoice

→ Input tax claimable

Zero-rated supply s.17 GSTA (GST (Exempt Supply) Order 2014) GST charged at zero percent Tax invoice is not required to be issued by supplier

→ Input tax claimable

ZERO-RATED SUPPLY

ZERO RATED SUPPLY→ Goods

Agriculture products – paddy, fresh vegetables, fruitsFoodstuff – rice, sugar, table salt, plain flour, cooking oil, breadLivestock supplies – live animals and unprocessed meatFish – live, fresh, frozen, driedThe supply of the first 300 units of electricity to domestic usersThe supply of water to domestic usersMedicinesExported goods – s.17 (1)(b) GSTA

→ ServicesServices in Malaysia – e.g. pilotage, salvage or towage servicesExported services – e.g. architecture services in connection with

land outside Malaysia International services – e.g. transport of passengers or goods from

place in Malaysia to a place outside Malaysia

DEEMED SUPPLY

DEEMED SUPPLY

• First schedule specifies matters to be treated as a supply of goods:Supply made whether or not for a consideration – treated as

supplies for GST purposes:→ the person who is carrying on a business is entitled for a credit

under section 38 Disposals or transfer of business assets so that no longer part of

business assets (para 5 (1)) Goods for business put for private used (para 5(3)) Goods for business use for non business activity (para 5(3)) Goods for business sold in satisfaction of a debt (para 5(7))

DEEMED SUPPLY

Deemed supply – cont.

change of use of such goods which results in the goods being excluded from any credit under subsection Test drive car change to salesman car (para 5(6))

Goods owns/dispose when ceases to be taxable person deemed as supply unless (para 5(8) & (9): No credit has been claim on the goods Not acquired through TOGC or Goods were purchased from a non taxable person Business carried on by a personal representative as a taxable

person

DEEMED SUPPLYFirst schedule of GST Bill specify matters to be treated as a supply of goods:Supply of electricity, gas, water, refrigeration, air conditioning or

ventilationTransfer of the whole property in movable goods transferred

• By way of sale; or• Under an agreement which expressly stipulates that the property

will pass at some time in the futureTransfer of land under

• An agreement for sale,• An agreement where ownership of such land will pass at some time

the future;• Any interest under Deed of Assignment;• Any strata title• As a result of default in payment under a security relating to land

DEEMED SUPPLY

First schedule of GST Bill specify matters to be treated as a supply of services:A supply of services to a connected person for no

consideration by a taxable personAny treatment or process which is being applied to

another person’s goodsLease, tenancy, easement, licence to occupy land or

transfer of undivided share in landThe transfer of:

Of any undivided share of the property in movable goods; orOf the possession of the movable goods

DEEMED SELF SUPPLY

Deemed Self Supply

Imported services recipient (s.13)Includes not taxable person

Local recipient who received goods from ATMS (s.72)Includes not taxable person

Supply of goods by taxable person to Approved Jeweller in the Approved Jeweller Scheme (s.73)

DISREGARDED SUPPLY

Disregarded supply• A taxable supply is made where no tax is to be charged but

input tax incurred is claimable:• Supply between members in group registration (s.27)• Supply from taxable person (principal) to the auctioneer (s.65)• Supply between a venturer and venture operator in JV (s.69)• Supply between ‘warehouse’ in warehousing scheme (s.70)• Supply by ATMS to a person belonged in a country other than

Malaysia (s.72)• Supply between members and lead member in capital market

(s.75)• Supply in and within Designated Area (s. Part XIV)• Supply of goods in relation to retail trade activities approved

under the Free Zone Act 1990 made within the free commercial zones (s.163)