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Industry Guide:

Tertiary

 
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FREQUENTLY ASKED QUESTIONS 

1. Are bookstores, sport shops, cafeteria, etc. situated inside and managed by the higher educational institution, required to register and charge GST on sale of goods and services to students and staff? 

Sales made by the bookstores, sport shops, cafeteria, etc. are subject to GST. If the supply made formed part of the higher educational institutions activities and the taxable turnover has reached the threshold limit of RM500, 000 the higher educational institutions must be registered. But generally, higher educational institutions normally rent the premise to these entities and collect rental income from them. The rental charge is subject to GST at a standard rate. If the bookstores, sport shops, cafeteria, etc have reached the taxable turnover of RM500,000 and registered for GST, then GST must be collected on the taxable sales and remitted by the entities concerned. They can claim any input tax incurred for furtherance of their business. 

2. If a university supplies books, computers and musical instruments to the students, is the university required to charge GST?

Yes, if the university is a GST registrant selling books it will be zero rated. [Please refer to the GST (Zero Rated Supply) (Amendment) Order 2015]. However, the sale of exercise books, computers and musical instruments to its students are subject to GST at standard rate. If the university retains the ownership of the items and merely lends the goods for free to the students, no GST is chargeable. Hiring of goods is a taxable supply and subject to GST. On the other hand, if the university charges a hire fee to the students for the use of these items, the fees is subject to GST.

3. What is the GST treatment on the acquisition of good by the university?

Acquisition of all goods except petroleum and imported motor cars by public higher educational institutions (Matriculation, Polytechnics, and Community Colleges) under the administration of MOE or other Ministries administering higher education will fall under item 3, First Schedule of the GST (Relief) Order, 2014. Acquisition of equipment and materials by public universities are given relief from payment of GST under item 4 First Schedule of the GST (Relief) Order, 2014. 

Private higher educational institutions are given relief from payment of GST under item 5 (c), First Schedule of the GST (Relief) Order, 2014 for the acquisition of multimedia equipment; equipment for linguistic and science laboratory; tools and equipment for technical and vocational studies; and chemical, solution and gas subject to conditions as stated in the order. These institutions have to submit a certificate to claim relief from the payment of GST in accordance with the Third Schedule, of the GST (Relief) Order 2014.

4. What is the GST treatment on provision of accommodation to staff and hostel to students by the higher educational institutions?

Residential accommodation for student is an exempt supply and not subject to GST. The same also applies to accommodation to staff as the accommodation is for residential purpose and the GST treatment is an exempt supply. 

5. What is the GST treatment if accommodation to students includes food supplied by the higher educational institutions?

Provision of accommodation which includes food to the students by the provider of education services, is not subject to GST. It is an exempt supply. However, if the food is provided by a third party, and the third party is a GST registrant he will charge GST to the higher educational institutions? The educational institutions will not be able to claim the GST paid on the subsequent supply to the students because it is an exempt supply. The provision of food and accommodation for education services is specified under item 16(c)(vii) of the GST (Exempt Supply) Order 2014. 

If the third party is a GST registrant, the provision of food directly to students in higher educational institutions is a taxable supply. They will charge GST at standard rate to students. 

6. Is GST chargeable on field trip by higher educational institutions?

If the field trip is a necessary component within the course taken by the students, any fees for the excursions or field trips will be exempt. The visit must be related to the curriculum and not recreational purpose. If the visit is directly related to the curriculum of the course of study, no GST is imposed on the visits. If you engage a third party to provide all or a part of a field trip, the GST treatment will be different. If the third party supplies the whole part of the excursion and he is a GST registrant he will charge GST to the provider of the education services. As a provider of the education services, the subsequent supply by the higher educational institutions to the students relating to the field trips has no GST implication meaning that you cannot charge GST on the supply of the field trip to their students even though the higher educational institutions have paid the GST to the third party. If the third party supplies any part of the field trip directly to students he will charge GST on the supply to the students as it is making a taxable supply and he is liable to charge GST to its customers. 

If food, rental of accommodation and transportation is charged in a single receipt for the field trip the supply is a mixed supply and the higher educational institutions as the provider of the supply must apportion between the taxable supply and the exempt supply. 

7. DNE University Sdn. Bhd. offered 10 courses to the students. What is the GST implication of courses which are not approved by MQA or Department of Skills Development?

Acquisitions of goods for courses of study which are not approved by MOE and the Malaysian Qualification Agency (MQA) or Department of Skills Development Ministry of Human Resource are not eligible for relief under the GST (Relief) Order, 2014. Such courses are standard rated supplies and input tax credit is claimable on acquisition of goods. However, any probationary courses offered to students while pending for MQA or Department of Skills Development for approval will be an exempt supply.

8. Is GST to be considered by educational institution when determining fees for the students?

Yes, every higher educational institution must consider GST. Tuition fees are exempt but some items in the bill which are not directly linked to the curriculum and course of study may be subjected to GST. This could include fees charged for hire of musical instruments, hire of computers, membership fees for associations unrelated to the curriculum of the courses taken by the students. 

9. Is sponsoring of scholarships by third parties to excellent students subject to GST? 

Yes. There is usually some benefit to the sponsor in the form of advertising but if it can be shown that the sponsor does not gain any benefit in return, then no GST is payable.

10. What type of supply by higher educational institution is subject to GST?

Any supply which is not related to education services is subject to GST. 

Example

University Perdana Malaysia sells its agricultural products such as fruits to the public, rental of their auditorium or use of their sports facility.

11. Are private colleges wholly owned by Ministry of Finance (MOF) considered as private educational institutions? (Example: TPM Technology)

Any higher educational institutions registered under the Private Higher Educational Institutions Act 1996 are considered as private educational institutions irrespective of whether the educational institution is owned by MOF or not. 

12. What types of supplies by government educational institutions are subject to GST?

Supplies made by government educational institutions which are not related to educational services and in competition with other businesses are subject to GST e.g. renting or leasing premises, selling universities’ products such as fruits, small plants, seeds, flower plants and vegetables to the market, consultancy services and research findings sold to the public at large. 

13. How do you treat students’ fees which are fully paid to local institution on educational services for twinning programs where studies are partly conducted in Malaysia and partly overseas?

Supply of educational services for twinning programs where the supply is GST Liability
Partly supplied in Malaysia by a private educational institution Exempt
Partly supplied outside Malaysia by an overseas university Zero rate 

14. What is the GST treatment on:-

 a) Commission paid by overseas university to Malaysian educational institution for services related to twinning programs in overseas such as making the  arrangements such as accommodation, flight ticket, visa etc, enrolling the students and collecting fees from the students for overseas university? 

 b) The royalty paid by Malaysian educational institution to overseas university for using the university’s name in Malaysia?

 a) Commission paid by overseas university to Malaysian university for the arrangements services is subject to GST. However, if the requirements specified under item 12    of the GST (Zero Rated Supply) Order 2014 are satisfied :-
    
     (i) The services supplied is under a contract with a person who belongs in a country other than Malaysia;

     (ii) The services is directly benefit the overseas university who belongs in a country other than Malaysia at the time the services are performed

    Then, the commission paid by overseas university can be treated as zero rated supply.

 b) Royalty charged to Malaysian university is for the right to use the name in Malaysia. This is considered as an imported services and subject to GST. Under imported  services, the recipient of the supply (Malaysian university) is treated as the supplier of the supply and is liable to pay the GST under reverse charge mechanism. Section 13  of the GST Act 2014 mentioned that in order for the reverse charge mechanism to take effect, the supply made by the recipient is for furtherance of a business and the  supply is a taxable supply. In this case, the royalty paid is related to the supply of educational services which is an exempt supply and therefore, GST paid is not claimable  as input tax.

15. Is renting or leasing of university facilities or educational institutions e.g. hall, sport facilities, accommodation to public subject to GST?

Supply of rent or lease by GST Liability
Public higher educational institutions  GST is chargeable at 6% 
Private educational institutions  GST is chargeable at 6% 

16. How do you treat research done other than for the purpose of education by University Perdana Malaysia on the instruction of Ministry of Agriculture or private company e.g. Golden Dream Sdn Bhd?

Research services supplied to… GST Liability
Ministry of Agriculture  Standard rate
Private company  Standard rate 

17. Are fees for education course material subject to GST?

Education course materials are materials supplied by the educational institutions related to the subject undertaken that are necessarily consumed by the students undertaking the course. E.g. photocopied or printed educational materials related to the course, paints, sketchpads or chalk, carpentry and chemicals used in the chemistry or related courses. GST treatment on fees charged for educational course materials as follows:-

Fees on course materials supplied and charged by GST Liability 
Educational institutions under MOE  Out of scope
Fees charged by public universities  Exempt 
Fees charged by private educational institutions Exempt 

18. What is the GST treatment on supply of entertainment services performed by university cultural club e.g. musical band, gamelan group, cultural dance etc?  

Supply of entertainment services for GST Liability
Free  Not subject to GST 
A fee Subject to GST as the supply of services does not form part of education services

19. Is GST chargeable for supply of educational services provided by overseas lecturers e.g. employed lecturers from overseas universities lecturing in Malaysia under twinning programs whose salaries are being paid by the overseas university partner?

Supply  Condition  GST Liability
Lecturers employed from overseas deliver lectures in local university Supply to private institutions  Deemed as imported services subject to GST. The recipient accounts for GST. However, such tax paid is not claimable.

20. What is the GST treatment on student’s fee paid if the student terminates the course taken?

As an education service is an exempt supply, the fees are not subject to GST.

21. Can ITC be claimed for GST incurred on all inputs for operating courses, administration, and rental or acquisition of capital goods for providing education services by educational institutions?   

All taxable supplies under education services are not claimable as the services provided are exempt supplies. However, any taxable supply directly provided by the higher educational institution such as consultancy services and if the university is a GST registrant, any GST incurred in making the taxable supply can be offset against output tax within the taxable period. Any input tax incurred must be apportioned accordingly between the exempt supply and the taxable supply.

22. Is ITC allowed to be claimed by higher educational institutions where the supplies made involve mixed supplies?

There will be instances when the higher educational institutions supply taxable supplies such as sales of goods, rental of their buildings etc. ITC is claimable. In normal GST treatment an entity which makes an exempt supply does not enjoy the ability to claim input tax. However, as the education services supply is treated differently under GST, the higher educational institutions are able to claim relief on certain goods which fall under item 4 and 5 of the GST (Relief) Order 2014 provided the requirements and conditions specified under the order are fulfilled.

23. How should an educational institution claim ITC on the purchases of the second hand goods?   

Input tax credit is claimable on GST paid for second hand goods purchased by any business making taxable supplies in the course of furtherance of business. However, if the second hand good purchased is a motor car, the input tax incurred is not claimable under Regulation 36 of the GST Regulations 2014. As providers of education services (exempt supply), educational institutions are not able to claim any input tax incurred in making exempt supplies unless those goods acquired fall under item 4 and 5, First Schedule of the GST (Relief) Order, 2014.

24. What is the GST implication on the education loan given by the bank to students and the interest imposed on the loan?

The provision of credit (education loan) by the banks is an exempt supply. Hence, the interest which is the consideration for the supply is not subject to GST.

25. Is GST chargeable on career guidance fee and pre-enrolment consultancy fee charged to students by universities/colleges?   

Career guidance and pre enrolment consultancy are consultancy services. Any consultancy service is a taxable supply and subject to GST.

26. Is a transcript fee charged by a college or university subject to GST? 

Supply of services where a transcript fee is charged by GST liability
educational institutions under MOE  out of scope 
public universities as statutory bodies  exempt 
private educational institutions  exempt

27. Is transportation supplied by educational Institution subject to GST?

The GST treatment is as shown in the table below:

Supply of public transportation by  GST liability
educational institutions for free  a) Not subject to GST.

b) Rental of bus is subject to GST by the transport company to the    education provider. GST paid is not claimable by the education  provider.

c) The subsequent supply by the education provider to students is  exempt 
Transport company directly to the students exempt 

28. Is food and drink supplied by vending machine which is placed at the educational institution subject to GST?

Vending machine supplied to educational institution by the vending machine operator is a taxable supply and subject to GST.

29. How do you treat distance learning?

The GST treatment is as shown in the table below:

Supply of distance learning program by GST Liability 
by educational institutions directly under MOE  Out of scope supply
by public universities Exempt
by private educational institutions  Exempt 

30. Is GST chargeable on education seminar, motivation seminar, counseling seminar or workshop related to education e.g. education seminar related to enhancement of career provided by education consultant company to staff and employees of higher education provider? 

The above activities are not education services as it is not provided to students but to the staff or employees of the higher education provider. Courses provided by the consultant are subject to GST at a standard rate if the company is registered for GST.

31. What is GST treatment on insurance policies for education? 

Under GST, education insurance policies are treated as life insurance and therefore it is an exempt supply and no GST is chargeable.

32. What are course materials and the GST treatment on course materials?  

Course materials are materials that are directly used, utilised and expended by students undertaking the course of study. If the higher educational institutions provide the course materials directly to students then the GST treatment is exempt for both public and private higher educational institutions.

Sales of materials directly to the students and those materials are necessarily used up by the students in undertaking the course of study will be subject to GST. Though it may be necessary in order to teach the curriculum but the act of selling constitute a business activity and therefore subject to GST.

33. What is the GST treatment on restaurants; haircuts run by a university for student training that attract public as customers?  

Supplies of food by a university restaurant or haircut at a saloon are subject to GST at standard rate.

34. ABC University offers accredited courses for overseas students to study in Malaysia. Many universities set up a policy of requiring payment of the 1 st semesters fees to reserve a place for the student and also prior to the student applying for his visa. If the student does not arrive in Malaysia without sufficient notice of cancellation what is the GST implication to the provider of the tertiary education?  

The payment of fees is conditional upon the student receiving a visa, the fee therefore does not create a confirmation that he is studying in Malaysia. The payment is considered as deposit. Failure to arrive without sufficient notice and any amount forfeited by the university is subject to GST and the university have to account for GST. The forfeited amount is a consideration for the payment of services by the university.

35. A subsidiary company of a tertiary education provider recruits international students and market its services all over the world. The university paid a fee to the subsidiary company as an agent. The student pay a fee to the college to cover course delivery and college administration costs for services incurred. Are the fees paid by the overseas students subject to GST? Is the commission received by the subsidiary subject to GST?  

The fees paid by the overseas students are not subject to GST as it is for an exempt supply relating to the tertiary education course of study in Malaysia.

The commission received by the subsidiary company for providing services to the university is subject to GST as it is a consideration for the supply of services provided to the university.

36. Doolen University rents a bus with the driver from Sanam Transport Company Sdn Bhd. What is the GST treatment on this supply of service (transportation of students)?  

Dooleen University provided transportation to 20 of the 2nd year Architecture students as part of an excursion or field trip related to the course of study which is an exempt supply. Where the University engages the service of Sanam Transport Company Sdn Bhd (bus and the driver) to provide the transportation for the excursion, it is subject to GST at 6% and the university pays GST on the rental to the transport company, if he is a GST registered person. Dooleen University is not entitled to claim input tax credit for the GST charged by Sanam Transport Company. The transportation provided by the university to the student is an exempt supply.

 
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