salient features of gst - mps.org.my

1

Date : 27 October 2013

Place : Carlton Holiday Hotel & Suites,

Shah Alam, Selangor

Salient Features of GST

BRIEFING AGENDA

1. Why GST?

2. What is GST?

3. Proposed GST Model

4. Basic Elements of GST

5. Registration for GST

WHY GST?

Why GST?

1

WHY GST?

Part of the government’s 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

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)

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

6

SST– Cascading effect in the same tax regime

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

7

GST eliminate cascading effect in the same tax regime

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 paid

RM0.20 by the

hotel embedded in

the selling price

Actual total tax

paid =RM0.63

(RM0.20+RM0.43)

8

SST– Double taxation due to multiple tax

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

9

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

WHY GST?MOST COUNTRIES HAVE IMPLEMENTED GST / VAT TOTAL COUNTRY = 160

OCEANIA

No of Countries = 7

Highest tax rate = 15%

Lowest Tax = 5%

ASEAN

No of Countries = 7


Lowest Tax = 7 %No of Countries = 44


Lowest Tax = 5%

No of Countries = 19


Lowest Tax = 3%



Lowest Tax = 10%


Highest tax rate = 17.5%

Lowest Tax = 5%



Lowest Tax = 5%

WHY GST?MOST COUNTRIES HAVE IMPLEMENTED GST / VAT TOTAL COUNTRY = 160

Ant & Barbuda

Tonga

Zimbabwe

Bahamas

Turkmen.

Uganda

Ukraine

Canada

Croatia

Uzbekistan

Vanuatu

Venezuela

Vietnam

Zambia

Portugal

Senegal

Luxembourg

Nicaragua

Sweden

CountryTime Period

2000 - 2009

1990 - 1999

1980 - 1989

1970 - 1979

1960 - 1969

1948 - 1959 France

Cent. Af. Rep

Macedonia

Montenegro

St. Vincent

P. N. Guinea

Paraguay

Poland

Czech Rep

Congo

Romania

Russia

Samoa

Singapore

Slovakia

Mexico

Morocco

Honduras

Ireland

Germany

Sudan

Serbia

Rwanda

Namibia

T & Tobago

Togo

Thailand

Tanzania

Tajikistan

Switzerland

Suriname

Sri Lanka

S. Africa

Slovenia

Tunisia

Taiwan

Spain

Peru

Panama

Norway

Uruguay

Cape Verde

Gambia

India

Comoros

Cameroon

Kazakhstan

Kenya

Cyprus

China

Kyrgyzstan

Latvia

Liechtenstein

Lithuania

Madagascar

Turkey

Haiti

Hungary

UK

Bolivia

Chile

Ivory coast

LesothoEthiopiaBotswana

LebanonEq. GuineaBosnia Herz.LaosDominica Isl.Belize

JordanChadAustralia

JamaicaCambodia

PakistanIcelandBurkina Faso

NigeriaGuineaBulgaria

NepalGhanaBenin

MozambiqueGeorgiaBelarus

MongoliaGabonBarbados

MoldovaFinlandBangladesh

MauritiusFijiAzerbaijan

MauritaniaEstoniaArmenia

MaltaEl SalvadorAlgeria

MaliEgyptAlbania

PhilippinesMalawiGuatemala

NigerJapanGreece

New ZealandIndonesiaDom. Rep.

KoreaEcuadorBelgium

ItalyCosta RicaAustria

IsraelColombiaArgentina

NetherlandsDenmarkBrazil

WHY GST?

Only Brunei, Malaysia and Myanmar have not implemented VAT/GST

VAT/GST in ASEAN countries

No threshold

Baht 1.8 mil

SGD 1 mil

Peso 1.5 mil

Lao Kip 400 mil

Riel 30 mil – 125 mil

Rupiah 600 mil

Registration Threshold(National Currency)

-10101999Vietnam

58,0001071992Thailand

806,000731993Singapore

35,00012101998Philippines

51,00010102009Laos

7,000 – 31,00010101999Cambodia

53,000 10101984Indonesia

Registration Threshold

(USD)

Current Rate(%)

Initial Rate(%)

Year Country

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 RM100,000

SGD320,000

(approx.

RM760k)

BHT4 mil

(approx.

RM390k)

Rp500 mil

(approx.

RM170k)

VND960 mil

(approx.

RM140k)

PHP500,00

0 (approx.

RM35k)

KHR150 mil

(approx.

RM115k)

LAK40 mil

(approx.

RM16k)

VAT / GST

Tax rate 6 7%

10%(reduced to

7% from

1/10/2010 to

30/9/2014)

10% 10% 12% 10% 10%

Threshold

(USD) 158,000 806,000 58,000 53,000 - 35,0007,000-

31,00051,000

Year

implement 2015 1993 1992 1984 1999 1998 1999 2009

WHAT IS GST?

What is GST?

2

WHAT IS GST?

Sales Tax &

Service Tax (SST)

5%, 6%, 10% & specific rate

Various threshold

Goods and Services

Tax (GST)

Rate = 6 %

Threshold = RM500,000

• To replace current tax system

• GST is charged on goods and services that are supplied in Malaysia

imports

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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

Business

Goods

Services

INPUT OUTPUT

GST on inputs

= Input tax Claimed

input taxGST on outputs

= Output tax

Raw materials,

Rents,

Electricity,

Furniture,

Professional

services etc.

PROPOSED GST MODEL

PROPOSED GST

MODEL

3

PROPOSED GST MODEL

18

Types of supply Output tax Input tax

Standard-rated 6% Claimable

Zero-rated 0% Claimable

Exempted No GST charged Not claimable

PROPOSED GST MODEL

19

HOW GST WORKS? - STANDARD RATED

Manufacturer

claims back

GST on input

Consumer

pays

6%GST only

Wholesaler

claims back

GST on input

Retailer

claims back

GST on input

Manufacturer Wholesaler Retailer Consumer

GST AT 6%

PROPOSED GST MODEL

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HOW GST WORKS? - STANDARD RATED

Selling price : RM125

GST : RM7.50

Total selling price :RM132.50

Purchase cost : RM100

GST* : RM6

Purchase price : RM106

Delivery / supply chain


*Note: claim input tax

Value-Adding

Activity

Added Value : RM25

(Add GST : RM1.25)

PROPOSED GST MODEL

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HOW GST WORKS? - ZERO RATED

Manufacturer

claims back

GST on input

Consumer

does not

pay any

GST

Wholesaler

claims back

GST on input

Retailer

claims back

GST on input


GST AT 0%

PROPOSED GST MODEL

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HOW GST WORKS? - ZERO RATED


GST : RM0



GST* : RM0




*Note: claim input tax

Value-Adding

Activity

Added Value : RM25

PROPOSED GST MODEL

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Agriculture products –

paddy, vegetables etcBasic food - rice, flour,

sugar, salt, cooking oil

Poultry (chicken, duck,

etc and unprocessed

meat

Livestock – cow, goat,

buffaloes, goat, sheep

swine, etc.

Fish, shrimps,

prawns,crab, cockles,

squid etc

Supply of first 200 units of electricity to domestic

users

Supply of water

to domestic users

Exported goods and

services and international

services

0%

– ZERO-RATED SUPPLIES

PROPOSED GST MODEL

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HOW GST WORKS? - EXEMPT

Supplier Private hospital Consumer

Supplier

claims tax

paid on input

Private

hospital

cannot claim

tax paid on

input

Consumer

does not

pay any

GST

GST AT 6 % NO GST

PROPOSED GST MODEL

25

HOW GST WORKS? - EXEMPT


GST : RM0



GST* : RM6



Manufacturer Supplier Consumer

*Note: cannot claim input tax

Value-Adding

Activity

Added Value : RM25

PROPOSED GST MODEL

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– EXEMPT SUPPLIES

Rail Transportation Bus

Water Transportation

Taxi/Hire Car

Toll Highway

Residential Property

Land for Agriculture

& General Use

Financial ServicesEducation/Health

GST

BASIC ELEMENTS OF GST

BASIC ELEMENTS

OF GST

4


Scope and charge

GST is charged on

the taxable supply of goods and services

made by a taxable person

in the course or furtherance of business

in Malaysia

GST is charged on the imported goods/services

PROPOSED GST MODEL

SUBJECT

TO GSTMADE IN MALAYSIA

FOR THE PURPOSE OF

BUSINESS

TAXABLE PERSON

TAXABLE SUPPLY

SUPPLY IMPORTATION

SCOPE OF TAX

NOT

SUBJECT

TO GST

NO YES

YES

NO

YES

NO

YES

NO

YES

NO

Supply test

BASIC ELEMENTS OF GSTMeaning of person Includes individual, corporation, Federal Government, State

Government, statutory body, local authority, society, trade

union, co-operative society, trust, partnership and any other

body, organization, association or group of persons, whether

corporate or unincorporated

Scope Includes natural and juridical persons

individual, sole proprietor and partnership

company, club, association, society, co-operative, trade union,

non profit body and unincorporated bodies

trust, trustee, executor, administrator and joint venture

Federal Government, Sate Government, statutory body and

local authority

Meaning of taxable person a person who is or is required to be registered for GST

BASIC ELEMENTS OF GSTPlace of supply to determine whether a supply is made in Malaysia or not

different rules for supply of goods and supply of services

Rules for supply of goods Goods treated as supplied in Malaysia

removal from a place in Malaysia to another place in Malaysia

(local supply)

removal from a place in Malaysia to a place outside Malaysia

(export)

B

A

CMalaysia O


Goods treated as supplied outside Malaysia

removal from a place outside Malaysia to a

place inside Malaysia (import)

removal from a place outside Malaysia to

another place outside Malaysia (out of scope)

A

C

Malaysia

O

B


Rules for supply of services

Services treated as supplied in Malaysia if

the supplier belongs in Malaysia

Services treated as supplied outside Malaysia if

the supplier belongs in a country other than

Malaysia


Supplier treated as belonging in a country if

he has in that country a business or fixed

establishment or fixed establishment and no

establishment elsewhere;

the supplier has no such establishments in any

country, his usual place of residence is in that

country; or

the supplier has establishments in that country and

elsewhere, the establishment which is most directly

concerned with the supply


Business establishment head office or principal place of business

Fixed establishment a branch or agency through which business is carried

out

Usual place of residence for body corporate, the place of incorporation or legally

constituted (registered office)

for unincorporated body, the place where centre of

administration is located

for individual, where he sets up home with family and is

in full time employment


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Time of supply

Basic Tax Point

basic tax point for supply of goods

(a) at the time the goods are removed;

(b) at the time when the goods are made available

(c) at the time when the supply becomes certain or

twelve months after the removal, whichever is

the earlier.

basic tax point for supply of services

at the time when the services are performed.


Tax invoice

issuedGoods

removed or

Services

performed

1 July 1 Aug4 July 24 July

Tax invoice issued within 21 days

Actual time of supply = 24 July

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Time of supply

21 days ruleif tax invoice is issued within 21 days after the basic tax

point, then time of supply is the time of the tax invoice


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Time of supply

Events before basic tax pointTime of Supply when the payment is received or tax

invoice is issued to the extent covered by the invoice or

payment, whichever is the earlier.

Time of

payment

Tax invoice

issued

Goods

removed or

Services

performed

1 June 1 July 1 Aug14 June 10 July24 June

REGISTRATION FOR GST

39

Registration

For

GST

5


Mandatory registration

makes taxable supplies in Malaysia

taxable turnover exceeds threshold

requirement to register

based on 12 months period

historical or future method


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Includes

Standard Rated Supplies

Zero Rated Supplies

Deemed Supplies such as private use, fringe benefit, etc.

Excludes

Exempt Supplies

Sale of Capital Assets

Imported Services

The determination of thresholdTaxable Turnover:


42

Date of

registration

1/9/14

Last day to notify and apply for registration

Liable to Register

28 Days

Preceding 11 Months

1/10/15

Period to notify

18/8/15 28/9/15

31/8/15

Reach

Threshold

First dayof 12 months

period

1/8/15

Current month +

The determination of threshold

Historical Method


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The determination of threshold

Future Method

28/9/14

Date of

registration

15/5/14

Last day to notify and apply for registration

Expected to reach threshold

28 Days

Liable to register

Current month

Start business

31/7/15

1/10/14

31/8/14

16/8/14

Period to notify

1/8/14

reach threshold

next 11 Months+


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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 for non resident

appointment of agent

joint venture registration

petroleum exploration activity

INQUIRY

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INQUIRY

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i) Ketua Setiausaha,

Perbendaharaan Malaysia

Pejabat Perlaksanaan GST,

Komplek Kementerian Kewangan,

Aras 3, Blok Utara, Perbendaharaan 2,

Presint 2, 62596 PUTRAJAYA.

Tel : 03-88823000

ii) GST PORTAL – http://www.gst.customs.gov.my

iii) Customs Call Centre (CCC)

Tel: 03- 78067200

Fax: 03- 78067599

Email: [email protected]

iv) Norazura Bt. Hashim–[email protected]

Tel : 03 – 88822857 Fax – 03 – 88822132

mailto:[email protected]

mailto:[email protected]

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End of PresentationRoyal Malaysian Customs

salient features of gst - mps.org.my

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