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Industry Guide:

Government, Local Authority and Statutory Body

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Federal and State Governments

1. If a government department disposes off its assets (office equipments or land or building), is the disposal of asset subject to GST?

All Government assets, including capital assets, disposed off to the public are regarded as out of scope supplies, hence not subject to GST. If it is disposed through a third party e.g. auctioneer, the services provided by the auctioneer are subject to GST. 

2. Are licenses issued by a Government Department subject to GST?

No, licenses issued by a Government Department are not subject to GST because licenses are issued as regulatory and enforcement requirements. 

3. What are the responsibilities of the Government Departments whose supplies are listed in the GST Government (Application to Government) Order 2014?

The department, which makes the taxable supply, must register with the Royal Malaysian Customs as a GST registered person if the turnover of the taxable supply exceeds the prescribed threshold of RM500,000 within 12 months (past or future). Once registered, the department must charge GST on the taxable supplies made and account for the tax collected to Royal Malaysian Customs. 

4. Can a supplier claim input tax on taxable supplies made to the Government who is given relief from the payment of GST?

The supplier can claim input tax on these supplies because the supplies are regarded as taxable supplies.

5. Do I have to issue a tax invoice for GST–relieved supplies made to a Government department?

If you are a GST registered person, you have to issue a tax invoice for such supplies as these are taxable supplies. You also have to attach a certificate certifying that you are relieved from charging and collecting GST under section 56(4) GST Act 2014 on your supply to the government department given relief from payment of GST under item 3 of the GST (Relief) Order 2014. 

6. Can a below threshold trader making taxable supplies to the Federal Government claim ITC?

A below threshold trader who have not registered voluntarily as a GST registered person is not allowed to claim ITC on the inputs of such taxable supplies. However, if he is registered voluntarily under GST, the trader is eligible to claim the input tax. 

7. The local authority provides development plan for any person who wishes to have it in his possession and charges payment for it. Is the payment subject to GST?

It is subject to GST as providing the development plan is not regulatory in nature. 

Local Authorities and Statutory Bodies

8. Is assessment rate collected by a local council subject to GST?

No, assessment rate collected by local council is not subject to GST since it is form of regulatory function of the local council.

9. The local authority do impose fine for improper parking, hawker trading without licence or late payment of quit rent. Are the fines imposed subject to GST?

Such fines are not subject to GST as they are more in the form of a penalty not a supply.

10. A local authority provides billboards for companies to advertise their products or services. Are the provision of such billboards subject to GST?

Charges imposed by the local authority for the use of the billboards for advertisement are subject to GST. However, the charge to the company which relates to the issuance of permit/ license to advertise is treated as an out of scope supply and is not subject to GST. 

11. The local authority leases out premises to be used for example as wet market. Do the local authority have to impose GST on the traders in the wet markets who are provided lots subject to a certain fee?

The local authority is making a supply of the right to use the lots in the wet market by the traders to sell their products. This is a form of business activity and is subject to GST.

12. Dewan Bandaraya outsourced street lighting to a third party, what would be the GST treatment on such outsourced supply?

Street lighting is part of the regulatory functions carried out by Dewan Bandaraya. However, if a third party is contracted to undertake the street lighting, the third party is actually making a taxable supply to Dewan Bandaraya and is subject to GST. 

13. Does a sub-contractor need to charge GST to the main contractor who has been contracted to carry garbage collection on behalf of a local authority?

The sub-contractor, if he is a GST registered person, must charge GST on the services he provides to the main contractor because the sub-contractor is actually making a taxable supply to the main contractor. Likewise if the main contractor is a GST registered person, the main contractor should charge the local authority for the services supplied.

14. What is the GST treatment on assets owned by the local council and disposed by it to the public?

If the assets are used for making taxable supply and the local council is a GST registered person, GST has to be charged and accounted for such asset disposed off.

15. Is the supply of facilities such as renting out badminton hall, community hall, etc by a local council in fulfillment of its social responsibility subject to GST?

Supplies made by a local council in fulfillment of its social responsibility are out of scope supplies.

16. Does a local authority need to register separately its divisions that make taxable supplies?

GST registration will be made in the name of the local authority established under the relevant law unless the divisions request this facility. 

17. Does a statutory body which makes wholly out of scope supply need to be registered under the GST Act?

Statutory body making wholly out of scope supply is not required to be registered under the GST Act. This rule also applies to a statutory body that makes wholly exempt supply or a mixture of out of scope supply and exempt supply. If statutory body makes mixed supplies, that is, both out of scope supply and taxable supply, the statutory body is required to be registered. 

18. Are examination fees charged by statutory bodies e.g. Board of Engineers (BEM), Board of Architect (BAM) etc. for admission to the profession subject to GST?

Supplies by statutory bodies e.g. BEM, BAM etc. that relate to regulatory and enforcement functions are out-of-scope supplies.

19. What is GST treatment on registration fees paid by architects to Board of Architects Malaysia (BAM) to enable to practice in their field?

BAM is a statutory authority responsible for the enforcement of Architects Act, 1967 to enable members to practice in their field. This is considered a regulatory and enforcement function. As such the registration fee imposed is an out-of-scope supply.

20. A non-profit organization holds conventions, seminars or conferences for members and the general public who have to pay registration fees to attend these events. What is the GST treatment on these registration fees?

The registration fees paid to attend conventions, seminar or conferences supplied by a non-profit organization is a taxable supply. Therefore, GST is charged on the registration fees

Grants, Subsidies and Royalties (Government’s Supplies)

21. Are grants given by Government through a Government department subject to output tax?

There will be no GST implication on the grant because they are given in the form of money, hence, a non-supply. Furthermore, supplies made by the Federal or State Government are out of scope supplies and are not subject to GST. Likewise, grants received by the Government or any Government agencies (NGO) from overseas donors such as DANIDA, UNESCO and World Bank is regarded as a non-supply.

22. What is the GST treatment on research grant given by the Government?

Outright grant given by the Government is regarded as non-supply and not subject to GST. If in return for the grant the Government receives benefits in the form of research patent rights as a consideration, the patent right is regarded as a taxable supply. The receiver of grant, if he is a GST registered person, must charge GST to the Government on the patent rights supplied to the government. 
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