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Basic Concept Of GST

Introduction

Goods and Services Tax (GST) which is also known as VAT or the value added tax in many countries is a multi-stage consumption tax on goods and services. Malaysia is implementing GST since 1st April 2015 and that will cause indirect impact on local business which includes inflation and new compliance requirement. 
 
GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except specific goods and services which are categorized under zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.
 
GST can only be levied and charged if the business is registered under GST. A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold (e.g. RM500,000 yearly). Therefore, such businesses cannot charge and collect GST on the supply of goods and services made to their customers. Nevertheless, businesses can apply to be registered voluntarily.
 
 
 
 

Responsibilities and Obligations of GST Registered Person

GST requires businesses who have exceeded the prescribed threshold to register and to keep records of input and output tax. Businesses report their liability in a specific period called taxable period. 
 
Explore the following sections to understand your responsibilities and obligations as a registrant under GST.
  • Registering your Business
  • Issuing Tax Invoices
  • Accounting for GST
  • Filing Tax Returns
  • Input Tax Credit Mechanism
  • Claiming GST Refunds
  • Paying GST
  • Offences
  • Review and Appeals

1)

Registering your Business

  The first step to being GST-ready is to register for a GST identification number. You need to check whether you are required to register or whether you want to register voluntarily. Persons having businesses with annual sales turnover exceeding RM500,000 are liable to be registered under GST. Persons include an individual, sole proprietor, partnership, company, trust, estate, society, union, club, association or any other organization including a government department or a local authority which is involved in the business of making taxable supplies in Malaysia.
   
  The annual sales turnover can be determined based on either:
 
  • The total value of taxable supplies of the current month and the previous 11 months, or
  • The total value of taxable supplies of the current month and the next 11 months.
 

2)

Issuing Tax Invoices

  When you charge GST, you need to issue a tax invoice showing the amount of GST and the price of the supplies separately. The tax invoice has to be issued within 21 days after the time of the supply.
   
  Particulars to be shown in the tax invoice:
 
  • The words 'tax invoice' in a prominent place;
  • The invoice serial number;
  • The date of issuance of the invoice;
  • The name (or trade name), address and GST identification number of the supplier;
  • The name and address of the recipient of the supply;
  • A description of the goods and/or services supplied;
  • The quantity or volume of the goods and/or services supplied, for example, litres of petrol, kilos of meat or hours of labour;
  • Any discount offered;
  • The total amount payable excluding tax, the rate of tax and the total tax chargeable shown as a separate amount;
  • The total amount payable including the total tax chargeable.
  • The Director General of Customs may upon request allow the tax invoice to be varied from the above whether in term of particulars in the tax invoice or issuance of other type of tax invoice e.g. simplified tax invoice.
   
  Sample:
  tax invoice
   
  The Director General of Customs may upon request allow the tax invoice to be varied from the above whether in term of particulars in the tax invoice or issuance of other type of tax invoice e.g. simplified tax invoice.
   
  Simplified Tax Invoice
  An invoice that does not contain all the particulars as required in the standard tax invoice and subject to the approval of the Director General. Simplified tax invoice can be used by the GST registrant to claim ITC provided the value of the invoice (inclusive GST) does not exceed RM500.
   
  DG may allow the simplified tax invoice to be issued containing:
 
  • The name (or trade name), address and GST identification number of the supplier;
  • The date of issuance of the invoice;
  • The invoice serial number;
  • A description of the goods and/or services supplied;
  • The total amount payable including the total tax chargeable; and
  • For each rate of tax chargeable, the gross amount payable including tax and the tax rate applicable
   
  Sample:
  Simplified Tax Invoice
 

3)

Accounting for GST

  Basically, all taxable persons will be required to account for GST based on accrual (invoice) basis of accounting i.e. all output tax and input tax are to be accounted and claimed based on the time when the invoice was issued or received.
   
  However, certain categories of taxable persons may be allowed to use the payment (cash) basis of accounting. This facility may be given to businesses who carry out their activities solely on a cash payment basis.
   
  All business and accounting records relating to GST transactions are to be kept in Bahasa Melayu or English for a period of seven (7) years.
 

4)

Filing GST Returns

  GST returns must be submitted to the GST office not later than the last day of the following month after the end of the taxable period.
   
  Taxable period is a regular interval period where a taxable person is liable to account and pay to the government his GST liability. The standard taxable period is on quarterly basis.However, a registrant may apply to be placed in other taxable period (monthly or 6 monthly) subject to specific conditions as follows:
 
Categories Periods Conditions
Standard Taxable Period Three months
  • Applicable to all taxable turnover not exceeding RM5 million
Non-standard
Taxable Period
One month
  • Applicable to taxable persons with annual taxable turnover exceeding RM5 million
  • applicable to other taxable persons on request and subject to approval
Six months
  • Special cases
 

5)

Input Tax Credit Mechanism

  Businesses have to charge and collect GST on all taxable goods and services supplied to the consumers. Only businesses registered under GST can charge and collect GST. 

Businesses are allowed to claim whatever amount of GST paid on the business inputs by offsetting against the output tax.
 
  • The excess amount of output tax shall be remitted to the government within the stipulated period.
  • In the case where the amount of input tax cannot be fully recovered, businesses can make a claim for refund from the government.
   
  Note:
 
  • Maximum time period to claim the input tax is 6 years from the date of supply.
  • Input tax credit cannot be claimed on blocked input such as GST paid on passenger motor car, club subscription fee, medical and personal accident insurance premium, medical expenses, family benefits, entertainment expenses except for employees and etc.
  • Apportionment rules have to be applied when the taxable person makes a mixed supply.
 

6)

Claiming GST Refund

  Any refund of tax may be offset against other unpaid GST, customs and excise duties. Refund will be made to the claimant within 14 working days if the claim is submitted online or 28 working days if the claim is submitted manually.
 

7)

Paying GST

  If your output tax exceeds the input tax, the difference shall be remitted to the Government together with the GST returns not later than the last day of the following month after the end of taxable period.
   
  Online payments through:
 
  • Banks (to be appointed).
  • Internet facilities.
  • Manual payment:
  • Payment via cheque/bank draft/money order must be made payable to 'Ketua Pengarah Kastam Malaysia' and mail to:
 
  Ketua Pengarah Kastam Malaysia
Jabatan Kastam Diraja Malaysia
Kompleks Kastam Kelana Jaya
No.22 Jalan SS6/3
Kelana Jaya 47301
Petaling Jaya, Selangor
  Or
  • Pay at any nearest GST office counter during custom working hours.
 

8)

Offences

  Penalties may be imposed if the following offences are committed:
 
  • Any deficiency on the net tax payable.
  • No GST return is made.
  • A GST return is submitted without payment or a lesser payment;
  • Any refund paid to which there is no proper entitlement.
  • Failure to register.
 

9)

Review and Appeals

  Any person who is aggrieved by the decision of the officer of GST may apply for a review and revision to the DG within 30 days from the date of notification. Alternatively, such person shall make an appeal to the Tribunal within 30 days from the date of the decision.
   
  The appeal case can be represented by the taxpayer himself or by any person whom he may appoint. The hearing shall be conducted in a private proceeding unless both parties agree to an open court.
 
 
 
 
 

What We Can Help You?

We are licensed Tax Agent registered with Inland Revenue Board (IRB) under Section 153(3) of Income Tax Act 1967. As a professional tax consultant, we can advise and assist you in your company or individual income tax compliance and submission according to Income Tax Act 1967, IRB's public ruling, Tax audit & investigation frameworks, Tax technical guideline and etc. We can also advice you on income tax incentives which are available and best suited for you.
 
We are also GST agent registered with Royal Malaysian Customs Department. We can help you comply with and conform to the GST standards and requirements. Start from registration to preparation and submission of GST return, we can solve all GST technical issues faced by you. We will also advice you on rules and regulation related to your business or company GST affairs.  
 
Our experienced staff will assist our clients with:
  • Registration of GST account with Royal Malaysian Customs Department (Jabatan Kastam Diraja Malaysia);
  • The preparation and submission of all forms and returns on a timely basis;
  • Solve technical issues faced by clients;
  • Advise on rules and regulation related to client GST affairs.
 
 

L & Co

18A, Jalan Sasa 2, Taman Gaya,
81800 Ulu Tiram, Johor, Malaysia.
Tel +607-861 7402
Fax +607-863 1003
Email liew@liew.my
 
     

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www.ict.com.my
 
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