01 framework & registration

8/11/2019 01 Framework & Registration

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Customs GST Seminar

GST Framework and

Registration

GST UNITROYAL MALAYSIAN CUSTOMSDEPARTMENT


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Briefing Agenda

1. Why GST?

2. What is GST?

3. Proposed GST Model

4. Registration for GST

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3

1

Why GST?


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Why GST?

Part of the

governments taxreform programme

Weaknesses of salestax and service tax

Make the taxationsystem moreeffective, efficient,business friendly,

transparent andcapable of generatinga more stable sourceof revenue

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WHY GST?

Part of the governments tax reform programme

Weaknesses of sales tax and service tax

Make the taxation system more effective, efficient, business

friendly, transparent and capable of generating a more stable

source of revenue

effective self policing

in-build cross checking features

able to address inherent weaknesses of the current sales

tax and service tax

efficient

less bureaucracy

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WHY GST?

business friendly

availability of various schemes

reduce business cost

transparent

GST will be shown on the invoice

public ruling

capable of generating a more stable source of revenue

not susceptible to economy downturn (unlike income

tax),

reduce reliance on direct taxes

depleting resource (petroleum)

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Why GST?

Part of the overall government tax reform

Inherent weaknesses in the sales tax and service tax (SST)system

cascading effect and double taxation

tax embedded in goods exported

transfer pricing tax bureaucracy (CJ5, CJ5A, CJ5B, CJ(P)2, invoice

inclusive tax)

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Why GST?

Hidden/shadow sectors/industries may be encouraged to bein the GST system

GST on input is claimable

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Service tax at 6%

Consumer

Charge : RM30,000

6% service tax : RM1,800

Charge : RM 6,000

6% service tax: RM360

Total tax paid = RM2,220

(RM1,800 +RM360+RM60)

Charge : RM1,000

6% service tax: RM60

Lawyer

services

Telecommunication

services

Professional

engineer

Consumer paid

= RM31,800

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SST Cascading effect in the same tax regime


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GST at 6%

Consumer

Charge : RM29,580 (RM30,000 RM420)

6% GST : RM1,774.80

Charge : RM 6,000

GST 6% : RM360

Total tax paid= RM1,774.80

Charge : RM1,000

GST 6% : RM60

Saving = RM445.20

(RM31,800-RM31,354.80)

Lawyer

services

Telecommunication

sevices

Professional

services Consumer paid

= RM31,354.80

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GST eliminate cascading effect in the same tax regime


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Product : biscuit Sales tax at 5% dan services tax at 6%

Factory price : RM4.00

Sales tax 5% = RM0.20

Consumer paid = RM7.63

(RM7.20 + RM0.43)

Purchase price : RM4.20

Hotel selling price : RM7.20

(RM4.20 + RM3.00)

Services tax 6% = RM0.43

Sales tax of RM0.20

paid by the hotel is

embedded in theselling price

Actual total tax paid

=RM0.63

(RM0.20+RM0.43)

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SST Double taxation due to multiple tax


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Product : biscuit GST at 6 %

Factory price : RM4.00

GST 6% = RM0.24

Purchase price : RM4.24

Hotel selling price : RM7.00

(RM4.00 + RM3.00)

GST 6% = RM0.42

GST of RM0.24

NOT embedded in

the selling price

Actual total tax

paid =RM0.42

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GST eliminated double taxation due to multiple tax

Consumer paid : RM7.42

(RM7.00 + RM0.42)

Total of GST paid : RM0.42

Saving to consumer = RM0.21


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Why GST?

250

200

150

Need to reduce

reliance on direct tax0.7% 200

0.6% 180

25.8%

1600.6% 0.7% 0.8% 29.0%

1400.5%

Need to reduce reliance

on petroleum revenue185.42

159.79 158.64 159.65

139.89

100

50

4.8%

0.7%

0.6% 29.1%

23.6%

20.3%

25.4%1.0%

22.8%

29.1%

49.8%

28.7%

31.4%

19.2%

18.4%

51.4%49.6%

32.0%

17.7%

49.6%

30.6% 17.2%

17.8%

19.1%

56.4%

52.6%

49.5%

123.55

120

106.30

100

80

61.86

60

4029.52

23.5% 50.4%

36.7% 47.1%

35.2%0

1990 2000 2005 2006

Direct tax Indirect tax

2007 2008 2009 2010 2011 2012

Non-tax revenue Non-revenue receipts

20

0

1990 2000 2005 2006

Total revenue

2007 2008 2009 2010 2011 2012

Petroleum revenue

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160 countries implementing GST/VAT

EUROPE

CARIBBEAN, CENTRAL &

NORTH AMERICANo. of countries = 19

Highest tax rate = 17.5%Lowest tax rate = 5%

SOUTH AMERICANo. of countries = 11

Highest tax rate = 22%

Lowest tax rate = 10%

No. of countries = 53



AFRICANo. of countries = 44



ASIANo. of countries = 19



ASEANNo. of countries = 7



OCEANIANo. of countries = 7Highest tax rate = 15%

Lowest tax rate = 5%15


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Why GST?

Countries Malaysia Singapore Thailand Indonesia Vietnam Philippines Cambodia Laos

Corporate tax

Tax rate 25% 17% 23% 25% 25% 30% 20% 28%

Individual tax

Highest

marginal rate 26% 20% 37% 30% 35% 32% 20% 24%

Highest

income band

SGD320,000RM100,000 (approx.

RM760k)

BHT4 mil Rp500 mil VND960 mil

(approx. (approx. (approx.

RM390k) RM170k) RM140k)

PHP500,000

(approx. RM35k)

KHR150 mil

(approx.

RM115k)

LAK40 mil

(approx. RM16k)

VAT / GST

10%

Tax rate 6% (reduced to 7%7%from 1/10/2010to 30/9/2014)

10% 10% 12% 10% 10%

Year

implement 2015 1993 1992 1984 1999 1998 1999 2009

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2

What is GST?

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Wh t i GST?


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What is GST?

Basic principles of GST

A consumption tax in the form of value added tax each stage of business transaction up to the retail stage of

distribution

Also known as Value Added Tax (VAT)

GST incurred on inputs is allowed as a credit to the registrant

offset against output tax

INPUT

Raw materials, rents,

electricity, furniture,professional services etc.

GST on inputs

Business

Claimed

input tax

OUTPUT

Goods

Services

GST on outputs

= Input tax = Output tax18

Wh t i GST?


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What is GST?

Types of supply Output tax Input tax

Standard-rated 6% Claimable

Zero-rated 0% Claimable

Exempted No GST Not claimable

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H GST W k ? St d d R t d


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How GST Works? Standard-Rated

Manufacturer

Manufacturer

claims back

GST

Wholesaler

Wholesaler

claims back

GST

Retailer Consumer

Retailer

claims back Consumer

GST pays

6%GST only

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GST AT 6%

H GST W k ? St d d R t d


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How GST Works? Standard-Rated

Delivery /

supply chain

Manufacturer Wholesaler

Value-

Added

Purchase cost : RM100 Activity

GST* : RM6

Purchase price : RM106 Added Value : RM25

*Note: claim input tax (Add GST : RM1.50)

Retailer Consumer

Selling price : RM125

GST : RM7.50

Total selling price : RM132.50

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GST Mechanism (Standard Rate)


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GST Mechanism (Standard Rate)

Tax computation on STANDARD RATED SUPPLY

1.804.206.00100.00etailer

3.00

0.60

0

Tax onInput(RM)

70.00

50.00

10.00

Sales(RM)

6.00GST collected by the Government

1.204.20Wholesaler

2.403.00Manufacturer

0.600.60Supplier

Net TaxPaid(RM)

Tax onOutput

(RM)

BusinessEntity

GST rate at 6%Final consumer pays RM106.00

H GST W k ? Z R t d


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How GST Works? Zero-Rated

Manufacturer

Manufacturer

claims back

GST

Wholesaler

Wholesaler

claims back

GST

Retailer Consumer

Retailer

claims back

GST does notpay any

GST

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GST AT 0%

Consumer

How GST Works? Zero Rated


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How GST Works? Zero-Rated

Delivery /

supply chain


Value-

Added


GST* : RM0

Purchase price : RM100 Added Value : RM25

*Note: claim input tax

Retailer Consumer


GST : RM0

Total selling price : RM125

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GST Mechanism (Zero Rate)

Tax computation on ZERO RATED SUPPLYe.g. Sugar

000125.00etailer

0

6.00

0

Tax onInput(RM)

120.00

115.00

100.00

Sales(RM)

0GST collected by the Government

00Wholesaler

-6.000Manufacturer

6.006.00Sugar cane

supplier

Net TaxPaid(RM)

Tax onOutput

(RM)

BusinessEntity

GST rate at 0%Final consumer pays RM125.00 25

How GST Works? Exempted


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Supplier

Supplier claims

tax paid on

input

Privatehospital

Private hospital

cannot claimtax paid on

input

Consumer

Consumer

does not

pay any

GST

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GST AT 6% NO GST



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Delivery /

supply chain


Value-

Added


GST* : RM6

Purchase price : RM106

Retailer Consumer


GST : RM0

Total selling price : RM131Added Value : RM25

*Note: cannot claim

input tax

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GST Mechanism Exempt)

Tax computation on EXEMPT SUPPLYe.g. Supply of Medical Aid by Private Hospital

04.200100.00Hospital

3.00

2.40

0*

Tax onInput(RM)

70.00

50.00

40.00

Sales(RM)

4.20Total GST collected by the Government

1.204.20Supplier

0.603.00Wholesaler

2.402.40Manufacturer

Net TaxPaid(RM)

Tax onOutput

(RM)

BusinessEntity

GST rate at 6% * Cannot claim input taxFinal consumer pays RM104.20

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3

Proposed

GST Model

Proposed GST Model


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Proposed GST Model

To replace current tax system

Sales Tax &

Service Tax (SST)

5%, 6%, 10% & specific rate

Various threshold

Goods and Services

Tax (GST)

Rate = ?%

Threshold = RM500,000

GST is charged on goods and services that are

supplied in Malaysia

imports

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Proposed GST Model (Zero-rate Supply)


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Proposed GST Model (Zero-rate Supply)

0%

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Agriculture products paddy

& fresh vegetables

Foodstuff rice, sugar, table

salt, plain flour, cooking oil

Livestock supplies meat,

muttons, swinePoultry & eggs

Fish, prawn, cuttlefish, crabs,

oyster, cockles, etc.Supply of the first 200 units of

electricity to domestic users

Supply of the first 35m3 of

water to domestic users

Exported goods and services

Proposed GST Model (Exempt Supply)


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Public Transportation - Rail, Bus, Taxi and Ferry

Land for residential, agriculture and general use

Funeral in a package Private health & education

Highway toll

Accommodation (28 days)

Financial services

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Proposed GST Model (Exempt Supply)

GST

Proposed GST Model (Supply by Government)


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Proposed GST Model (Supply by Government)

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Proposed GST Model (Special Schemes)


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To provide cash flow relief to businesses

Approved Trader Schemefacility given to major exporters where GST on imports is suspended

Approved Toll Manufacturer Schemefacility given to local toll manufacturer to disregard tax on value added

charges to overseas client

Approved Jewellers SchemeGST suspended on gold and precious metal acquired by jewellerymanufacturers

Flat Rate Scheme

to allow farmers to collect additional charges at specific rate from thebuyers

Margin Schemesecond hand car dealers to account GST on the margin

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To provide cash flow relief to businesses

Warehousing SchemeGST suspended in public and private warehouse

Group registrationsupply within the group will be disregarded

To promote tourism

Tourist Refund Scheme

tourists allowed to claim GST paid on purchases

Designated Areano GST in Labuan, Langkawi & Tioman

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http://www.gst.customs.gov.my

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4

Registration

for GST

Registration Before Appointed Date


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Liable to be registered if

a person makes taxable supplies of goods

and services in Malaysia; and

reasonable grounds to believe his taxableturnover in the period of 12 monthsimmediately succeeding the appointed datewill exceed the prescribed threshold

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Taxable Turnover

Includes

standard ratedsupplies

zero rated supplies

deemed suppliessuch as private

use, fringe benefit,etc.

Excludes

exempt Supplies

sale of capitalassets

imported services

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registration exercise begins 6 months before the appointed

date persons liable must register 3 months before the appointed

date

commit an offence if fail to register

advisory audit

registration either electronically or manually

use GST-01

GST registration number issued upon registration effective date is from the appointed date

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eg st at o e o e ppo ted ate

Future Method

Expected to exceedthreshold after AD

16 November 2014

Nov Dec

Appointed date is 1 April 2015Date of registration

1 April 2015

Jan Feb Mar Apr

1 January 20151 November 2014

Period toregisterLast day to notify andapply for registration

Current month (November) + next 11 months

31 October 2015

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GST Registration


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g

Voluntary registration

for businesses below threshold

must remain registered for at least 2 years

Other types of registration

branches or divisional registration

group registration

group of companies

registration of foreigners

appointment of agent

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Wan Leng WhattGST Unit

Royal Malaysian Customs Department

Tel: 03-88822424Email: [email protected]

Thank YouFor Enquiries, please contact:

1300-88-500

03-8882 2111

www.gst.customs.gov.my

Email: [email protected]

Fax: 03-7806 7599

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http://www.gst.customs.gov.my/mailto:[email protected]:[email protected]://www.gst.customs.gov.my/

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