Overview and GST Impact

to businesses
VENUE : IMPIANA KLCC
DATE : 18 NOVEMBER 2014
Co-organised by
Ministry of International Trade and Industry (MITI) &
Korean Chamber Of Commerce Malaysia (KOCHAM)
Presenter:
Mohammad Sabri Bin Saad
Senior Assistant Director of Custom

Agenda
1
2
3
4
5
6

Introduction
Why GST?
What is GST?
GST- The Malaysian Model
GST Impacts
Conclusion

Introduction

A Replacement Tax
To replace current consumption taxes
Sales Tax &
Service Tax (SST)
5%, 6%, 10% & specific rate
Various threshold

Chargeability
GST is charged on goods and services
Supplied in Malaysia or imported

Goods and Services

Tax (GST)
Rate = 6 %
Threshold = RM500,000

Current consumption tax

Sales Tax

Manufacturer

Wholesaler

Sales tax is
imposed and
collected at the
manufacturer level

1972

Year of
Implementation

1975

Selected goods
manufactured locally
and imported

Scope of tax

Prescribed services

RM100,000

Threshold

0 RM3 millions

5%, 10% & specific

Rate of tax

6% & specific

Retailer

consumer

Service tax

Services
provider

Consumer
Service Tax is
imposed when
services is
performed
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https://www. gst.customs.gov.my

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Why GST?

Why GST?
To restructure the nation's tax structure to
be more
efficient, effective, transparent ,
business-friendly
and capable of generating
a stable revenue source

Why GST?
Weakness in SST

GST more Effective &

Efficient

Tax on Tax
Transfer Pricing
No Tax Relief On Exports
Self policing & Increase Tax Compliance
Less red tape
Transparent

National Revenue

Reduce dependence
on income tax - 56.4% (2012)
Reduce dependence
on petroleum products - 32.6% (2012)

Shadow Economy

Come out and register under the GST

Size in Malaysia is quite big (30%)

Not only the locals

have to pay tax

Tourist and foreigner also have to pay GST

9

What is GST?

What is 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
OUTPUT

INPUT
Raw materials,
Rents,
Electricity,
Furniture,
Professional
services etc.
GST on inputs
= Input tax

Goods
Business
Services

Claimed
input tax

GST on outputs
= Output tax
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What is GST?

Types of
supply

Output tax

Input tax

Standard-rated

6%

Claimable

Zero-rated

0%

Claimable

Exempted

No GST charged

Not claimable

How GST Works?

Manufacturer
Claim back GST

6%

Wholesaler Claim back GST

Retailer Claim back GST

Consumer pays 6%
GST only

Zero-rated supply

0%
Manufacturer
Claim back GST

Wholesaler Claim back GST

Retailer Claim back GST

No GST pay by
consumer

Exempt supply

6%
Manufacturer
Claim back GST

GST

Private Hospital
Cannot claim back GST

Private Hospital
does not charge
GST consumer does
not pay any GST

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GST The Malaysian Model

Malaysias GST Model

GST exempt supply

Zero rated Supply (0%)

Food Items

rice , flour & Sago and peas dhal

sugar & salt
cooking oil ( palm oil, coconut & peanut)
spices and cencalok , budu , belacan
Infant milk
Bread

Rail

Bus

Taxi / Car Rental

Toll

Water
Transportation

Land(General)

education /
Health

Residential

financial
institutions

Agricultural Paddy
fresh vegetables & salads
Products
All fruits

Livestock
& Meat

Seafood
Utility

Export

Medication

cattle , sheep , buffalo , pigs

poultry ( including eggs of poultry )
all types of seafood including dry fish & anchovy
water supply (domestic)
The first 300 units of electricity (domestic)

Exported goods and services

Several categories of drugs zero rated (2900

drugs and medicines under National Essential
Medicines are zero rated)
Bersatu Membangun Bersama

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GST The Malaysian Model

Budget 2015 - Goods which are subject to
GST at zero rate:

White and wholemeal bread

Prescribed Medicine
Coffee powder, tea dust, cocoa powder
Yellow mee, kuey teow, laksa and meehon
Printed matters : Newspaper, reference
books, text books, exercise and work
books, religious text etc

Goods which are not subject to GST:

Petrol (RON 95), diesel, LPG

GST The Malaysian Model

Government services
No GST on the supply of goods and services made
by
Federal and State Government except certain
services by government department
e.g. water supply and advertising
statutory body and local authority in respect of
its regulatory and enforcement functions
out of scope

GST The Malaysian Model

Special schemes

to provide cash flow relief to businesses

to avoid double taxation
to promote tourism

GST Impact

GST Impact Overcome weakness

SST

GST

Cascading

Eliminated

No Complete Tax
Relief On Export

Export is zero rated

and eligible to claim
input tax credit

Transfer pricing

GST can overcome

Transfer pricing
problem in every supply
chain
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GST Impact CPI

Impact on
Consumer Price Index (CPI)
Territory

CPI

Penisular Malaysia

1.20 %

Sabah

1.02 %

Sarawak

1.03 %

Average

1.08 %

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GST Impact on Business

Business becomes more competitive
GST on input is claimable
GST is no longer a business cost
Exports becomes more competitive
No element of tax embedded
Unlike SST, GST is self-policing, less human
intervention with the authorities

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GST Impact on Business

Cash flow
GST claimable even though payment has not been
made
invoice credit method
No matching between input and output
all purchases and acquisition are readily
claimable
Special schemes/rules
ATS, ATMS, AJS, FRS, warehousing, margin
scheme, group registration
Bad debt provision
Automatic offset if no payment received after 6
months from date of supply
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Special Schemes
Facilities for manufacturing activities:
Approved Trader Scheme (ATS)
facility given to major exporters where GST on imports is
suspended

Approved Toll Manufacturer Scheme (ATMS)

facility given to local toll manufacturer to disregard tax on value
added charges to overseas client

Warehousing Scheme
GST suspended in public and private warehouse
Approved Jewellers Scheme (AJS)
GST suspended on gold and precious metal acquired by jewellery
manufacturers

GST Impact on Business

Reduce cost of doing business for businesses especially the
export oriented companies - LMW and FIZ
Sales Tax

GST

Importation of goods
Raw materials and machineries
directly used - sales tax
exemption.
Goods which are indirectly
used for business e.g
stationeries, tires and office
equipment are subject to tax.

GST is suspended on
importation of raw materials and
machineries directly/indirectly
used in manufacturing (ATS).

Locally acquired goods from Locally acquisition of goods are

licensed manufacturers are not
subject to GST. GST on inputs
subject to Sales Tax. However, If
are claimable.
is acquired from the traders, the
purchase price
would be
embedded with the element of
sales tax.

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GST Impact on Business

Start-up cost
Not a major concern for many businesses because of the high
threshold
business to install new or upgrade computer system, staff
training, accounting system and book keeping
For SME free accounting software may be given by
government
Tax incentive
compliance cost
Many businesses are already registered under the SST
Web based system to facilitate filing of returns at no cost
Special advisory unit especially for SMEs
Free seminars ,training and dialogues
Industry guides

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Budget 2015 - GST Assistance Package

Business
Reduction of corporate income tax rate by 1% from 25%
to 24%
Reduction of corporate income tax rate for SMEs from
20% to 19%
Reduction of co-operative income tax by 1% to 2% from
20% to 19%
Income tax deduction for secretarial fee and tax filling
fee:
secretarial fee up to RM5,000
tax filling fee up to RM10,000
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Budget 2015 - GST Assistance Package

Business
Accelerated Capital Allowance on expenses for
purchase of ICT equipment and software
Further deduction on expenses related to training on
accounting software and ICT
RM1000 cash assistance for the purchase of accounting
software for SMEs
Training grant for Income tax deduction for secretarial
fee and tax filling fee:

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GST Impact on economy

Goods and
services produced
in Malaysia will
become more
competitive

Exports and
international
services are zerorated

Attract more
tourists to visit
and shop in
Malaysia

Tourist refund
scheme At
international
airports

Duty Free Zone

-Labuan , Langkawi
and Tioman
-no GST

Computable General Equilibrium Model (CGE)

GST will boost GDP to 0.3 %

export (0.5%)
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SUMMARY
Structural defects in the current tax system making Malaysia
less competitive and in need of urgent Reform.

GST will make pricing mechanism in Malaysia very transparent

and would benefit consumers in the long run as GST could help
to curb excessive profiteering.
GST is a prerequisite to make Malaysia a High Income Nation

Efficiency of GST would boost the Government Revenue and

help to plug leakages .

Thank you

Comments, Clarifications and Suggestions

i)

ii)
iii)

Ketua Setiausaha,
Perbendaharaan Malaysia
Bahagian Cukai,
Kompleks Kementerian Kewangan,
Presint 2, 62596 PUTRAJAYA.
Tel : 03-88823000
Ketua Pengarah Kastam
GST PORTAL http://www.gst.customs.gov.my

iii) Customs Call Centre (CCC)

Tel:
03- 78067200/03-88822111
Fax: 03- 78067599
Email: ccc@customs.gov.my

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