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Industry Guide:


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1. What are the taxable supplies do I take into account for the purpose of GST registration?

The supplies are:

(a) Sales of unredeemed article

(b) Handling/administration charges

(c) Other taxable supplies. 

Input Tax Credit 

2. I incur expenses on repairs and cleaning of broken unredeemed goods before I sell them. Can I claim GST on the expenses incurred on the sales of these unredeemed goods?

Yes, you can claim the GST in full as input tax credit because the inputs are directly attributable to the sales of unredeemed goods (standard rated supply).

3. What about overhead expenses incurred such as electricity and office rental?

Since electricity and office rental are residual inputs, you need to apportion these expenses by using the turnover method because as pawnbrokers, you are supplying both exempt and taxable supplies. Residual inputs are inputs which you cannot directly attribute to either taxable or exempt supplies. 

4. The pawnbroker incurs GST on auctioneer’s service fee. Can the pawnbroker claim input tax credit on this service fee?

No, the pawnbroker is not allowed to claim GST incurred on the auctioneer’s service fee because the auctioneer sold the unredeemed pledge on behalf of the pawner who is the owner of the article.

Handling Charges 

5. A pawnbroker chargers RM0.50 per ticket as handling fees. Is the fee subject to GST?

Yes, it is subject to GST at a standard rate.

6. Are the cleaning services incurred on the pledges provided by the pawner to the pledgee subject to GST?  

Yes, the supply is a standard rated supply.

Disposal on Imitation Items 

7. Sometimes the pawnbroker without knowledge accepts an imitation item as pledge from the pawner. When the pawnbroker sells the imitation item and subsequently suffers losses, is this sale subject to GST?

The disposal of any unredeemed article whether genuine or imitation is a taxable supply. Therefore, you must charge GST on such sales.

Loss on Disposal  

8. Sometimes the sales proceed of the unredeemed pledge does not cover the value of the loan and interest, and subsequently the pawnbroker suffers a loss. Can the loss be exempted from GST?

Any disposal of an unredeemed pledge is a taxable supply irrespective of whether there is profit or loss. Therefore the sale will be subjected to GST and no exemption will be given.

Disposal of Pledge through Open Tender/Auction under Ar-Rahnu

9. I dispose unredeemed pledge through a tender exercise. In the tender process, I sell tender forms to the public. Is the sale of the tender form subject to GST?

Yes, the sale is subject to GST at the standard rate.

10. I charge a service charge of 1% on the sales price for a disposal of a pledge. Is the service charge subject to GST?  

Yes, it is subject to GST at the standard rate.

Unredeemed pledge under conventional pawnbroking 

11. When a pledge valued at RM150.00 is not redeemed after the redemption period, the ownership of the goods is transferred to the pawnbroker. Is the transfer a supply of goods from the pawner to the pawnbroker? 

The ownership transferred is a result of a default in repayment of the loan and the goods were confiscated. Hence, no supply is made when the goods is not redeemed.

Relief for second-hand goods 

12. Can a pawnbroker secure a reduction on the tax charged i.e. relief for second-hand goods, when he disposes an unredeemed pledge?

No, such reduction is not allowed in your business as it only applies to disposal of motor vehicles (cars, motorcycles, buses, etc.) and real estate properties. Please refer to the GST General Guide for further details of the scheme.
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Taman Gaya,
81800 Ulu Tiram,
Johor, Malaysia.

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Penang, Malaysia
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