GOODS AND SERVICE TAX IN MALAYSIA

Introduction

Under Goods & Services Tax (GST) system, businesses

with annual sales of RM500,000 or more, oblige to be
registered under the GST.

If your business annual sales do not exceed this amount,

you are not required to register for GST.Such businesses
can apply for voluntary registration.

However, once registered, the businesses must remain in

the system, for at least 2 years. On top of that, the business
required to charge and collect GST on the taxable supplies
and entitled to claim input tax credit.

To determine whether your business obliges to register for

GST, a calculation is made base on previous 12 months and
forecast next 12-month sales. The annual sales of
RM500,000 threshold deem reach when the sales records
for the past 12 months and estimated sales for the next 12
months reach this figure.

The annual threshold of is fixed at RM500,000 to ensure

that the small businesses are GST-free and are not required
 to bear the costs of registration (start-up cost up cost and
compliance cost) under the GST.

Types of Supply

They are 4 types of supplies under the scope of Malaysia

GST such as standard rated supplies, zero rated supplies,
exempt supplies and supplies not within the scope of GST.

Goods and Services that fall under each category

predetermined by the Royal Custom Department of
Malaysia.

Standard Rated Supplies

1. Standard rated supplies are referring to taxable goods and

services, which are subject to a standard rate of 6%.

2. Any taxable person or company who is registered under

GST requires to collect GST on behalf of the government
on their sales of the supplies. The person or company is
eligible to claim input GST credit on the business inputs in
making the said supplies.

3. For the consumers, they can identify the standard rated

supplies by looking at the receipt when making the
purchase. Normally, standard rated supplies GST labelled
with an S.
4. The examples of standard rated supplies are local supply of
goods or services, supply of land and building for
commercial and construction of all types of building.

Zero Rated Supplies

1. Zero rated supplies are referring to taxable goods and

services, which are subject to a tax rate of 0%.

2. Within this category, taxable person or company who is

registered under GST does not require to collect any GST
on their sales. However, the said person or company is
eligible to claim input GST credit on the business inputs in
making the said supplies.

3. For the consumers, they can identify the zero rated supplies
by looking at the receipt when making the purchase.
Normally, zero rated supplies GST labelled with a Z.

4. The examples of zero rated supplies are goods such as basic

food and utilities such as beef, rice, sugar, water for
domestic use and first 200 units of electricity per months
for domestic use.

Exempt Supplies

1. Exempt supplies are referring to goods and services, which

are not subject to GST.
 2. Within this category, taxable person or company who is
registered under GST does not required to collect any GST
on their sales nor eligible to claim input GST credit on
the business inputs in making the said supplies.

For the consumers, they can identify the zero rated supplies by
looking at the receipt when making the purchase. Normally,
exempt rated supplies GST labelled with a Z.

The examples of exempt supplies are transport services,

toll or highway and certain financial services.

Supplies not within the scope of GST

1. This category refers to supplies, which do not fall within

the charging provision of the GST Act.

2. The example include non-business transactions, sale of

goods from a place outside Malaysia to another place
outside Malaysia as well as services provided by the
Government sector.

Type of Supplies GST Rate Input GST

Standard Rated 6% Claimable

Zero Rated 0% Claimable
Exempt Not Charged Not Claimable