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GOODS AND SERVICES TAX (GST) - FAQs

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Output

Q: Are all companies liable to be registered as GST registered person?

A: Yes, if you make taxable supplies and have annual turnover exceeding RM500,000. However, if your annual turnover is below this threshold, you can still apply for voluntary registration.

Q: What is a taxable supply?

A: A taxable supply may not be restricted to your sale of goods. It includes :- • Disposal of business assets • Business gifts exceeding RM500 given to same customer in

the same year • Fringe benefits given to employees • Application of business assets for non-business purposes • Goods which are business assets on hand at deregistration

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Output (cont’d)

Q: If I am registered in Malaysia and provide services outside Malaysia, is the supply subject to GST?

A: Yes, this is taxable supply but it is zero rated. You are eligible to claim input tax for all supplies related to such services.

Q: If I have a business registered outside Malaysia, do I account for GST ?

A: No, the business is considered out of scope.

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Output (cont’d)

Q: If I give discount to my customers, can I charge GST on the discounted price?

A: Yes, GST should be computed on the discounted price

Q: When a certain quantity of goods are given free as incentive for bulk purchases, for example for every 20 units of a product purchased at a price of RM5,000, I offered my customer 2 units free, must I also account GST on the 2 units given free?

A: GST will be based on RM5,000. The 2 units given free will be considered as discount

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Output (cont’d)

Q: If I give business gifts to my customers, do I have to account for GST?

A: In principle, gifts to customers are deemed taxable supply because it is made in the course of furtherance of your business. However, under GST law, a gift is not a supply and no GST is due if the cost of the gift is worth less than RM500 and given to the same customer in the same year. Any input tax incurred is claimable.

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Inputs

Q: Can a registered company treat all the GST paid for the business acquisitions or purchases as his input tax?

A: Generally, all GST incurred can be treated as his input tax, if he incurs the GST for his business purpose.

Inputs normally acquired can be categorised as follows :- •Capital assets – goods that can be capitalised for accounting purposes e.g. land and building, plant & machineries & office equipment •Raw materials and components •Services, utilities and other charges

• Services – supplies other than goods such as maintenance of plant and machineries, professional fees

• Other charges – telephone, rental, transportation • Utilities – water, electricity

•Administrative expenses

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Inputs (cont’d)

Q: If have to return some goods to my supplier due to defect, can I claim GST paid on returned goods?

A: When you returned the goods, your supplier should refund you the GST paid by way of a credit note. If you have already claimed the input tax, then you have to reduce the said input tax in the taxable period in which the credit note is issued

Q: If I acquire certain services from overseas, what is my GST liability?

A: When you acquire services from overseas, you are treated as making the supply. Therefore, you need to account for tax on such services. However, if you are making wholly taxable supplies, you can claim the entire GST accounted, and hence no net GST implication.

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Inputs (cont’d)

Q: Can I claim input tax on the whole value (purchase price) of a machinery acquired under hire purchase?

A: Yes, you can claim on the whole purchase price based on the instalments paid. In a situation where interest charged is separately identified, the interest is not subject to GST (exempt supply).

Q: What is the GST implication on machinery that I acquire under lease?

A: If it is a finance lease, the treatment is similar to hire purchase (as above). If it is an operating lease, GST will be imposed on the value of each lease payment. If interest is disclosed separately under the leasing agreement, the interest is not subject to GST (exempt supply)

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Inputs (cont’d)

Q: How do I claim input tax when I paid advance payment for a machinery until it is ready for collection?

A: Your supplier would charge you GST on the value of each payment received. You can claim input tax based on the tax invoice that you receive.

Q: If I am given credit term by my supplier, can I claim input tax before I make the payment to supplier?

A: Yes, provided you hold a valid tax invoice from your supplier

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Other related matters

Q: If I loan some raw materials to another person for his urgent use, do I have to account for GST output tax even if the other person replaces the raw materials I loaned to him?

A: Yes, it is a supply because the business asset is transferred and consumed by another person.

Q: If I loan a machine (my business asset) to another person for his use, do I have to account for GST output tax?

A: Any usage of business asset by another person, whether or not for a consideration, is regarded as supply of services. Therefore, you have to account for GST output tax on the usage of the asset based on open market value.

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Other related matters (cont’d)

Q: What if the machinery is leased out to a company located overseas?

A: When you send the machinery to your lessee abroad, the good should be treated as export and hence subject to GST at 0%. When the good is subsequently brought back to Malaysia, GST is payable on the machinery at the time of importation. You can claim the GST paid on the machinery as input tax credit.

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Other related matters (cont’d)

Q: What happen if my customers fail to make payment on goods previously supplied where output tax has been accounted?

A: You can claim bad debt relief (or doubtful debt relief) on the whole or any part of the GST output tax paid in respect of taxable supplies, subject to the following conditions :-

• You have already accounted for and paid the tax on the supply

• You have not received any payment or part payment six months from the time of supply or the debtor has become insolvent before the period of six months has lapsed,

• You have taken sufficient efforts to recover the debt

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Employee benefits

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Output tax

Q: Under what instances do I have to account for output tax on employee benefits?

A: Basically, any goods given free to employees are subject to GST. However, under the gift rule, if the cost of goods does not exceed RM500 and given free to the same employee in the same year, you do not need to account for GST. If the cost exceeds RM500, you have to account for GST except for those goods come under blocked input tax recovery or if it is stated in the employment contract or company policy.

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Output tax (cont’d)

Q: Is the same applicable for services?

A: No, for services, you do not have to acount for GST if the services for your employees are provided free.

Q: Should I acount for GST when I provide free accommodation to my employees?

A: No, since this is not a supply.

Q: If I provide free meal to my employees in the company’s canteen, do I have to acount for GST?

A: No, since this is not a supply.

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Output tax (cont’d)

Q: Is monetary rewards given to employees subject to GST?

A: No, since money is neither goods nor services.

Q: If I provide car or housing loan to my employees as employee benefits, do I have to acount for GST?

A: No, since this is an exempt supply.

Q: Are shares given free to employees are subject to GST ?

A: No, since this is an exempt supply.

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Recovery of input tax

Q: A manufacturing company provides transportation (worker bus) for free to his workers. If the company rents buses for the transportation, can the company claim input tax incurred on the rental?

A: Yes, since the rental of buses is incurred for business.

Q: A company gives free trip to staff for excellent performance. Can input tax be claimed on purchase of the package?

A: Yes, since it is incurred for business.

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Recovery of input tax (cont’d)

Q: A company purchased 10 hampers worth RM2,000 to be given to the employees. Can input tax be claimed on the purchase?

A: Yes, since it is incurred for business.

Q: Can a company claim input tax on GST incurred on training of staff?

A: Yes, since it is directly attributable to the business.

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Recovery of input tax (cont’d)

Q: Can a company claim input tax if tax invoice is addressed to the employee?

A: No, unless the supply of goods or services is acquired in the course of his official duty or acting on behalf of the taxable person.

Q: Can a company claim input tax on handphone usage which is in the employee’s name?

A: Yes, provided the company can prove that the expense is for business purpose borne by the company i.e. appear in the company’s account and/or stated in the company policy.

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Disallowance of input tax

Q: Is GST incurred on purchase of corporate membership in recreational club claimable?

A: No, because it is a blocked input tax.

Q: Can a company claim GST incurred on F&B for annual dinner?

A: Yes, provided the function is attended by the employees of the company only. If spouses/ family members of the employees attend the function as well, apportionment has to be made as GST incurred can only be claimed on amount attributable to employees.

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Disallowance of input tax (cont’d)

Q: My company purchased and registered a car under the company’s name. The car is for business use including for employees‘ official use. Can the company claim input tax on GST incurred on the car?

A: Generally, input tax incurred on any acquisition of passenger car for company use is not allowed to be claimed. However, if the car is exclusively used for business purpose, input tax can be claimed subject to the approval and conditions imposed by the Director-General. In such as case, the car can be identified, for example, there is a company logo/ name on the car.

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Property developers

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Supply

Q: In the course of undertaking property development project, I have to surrender part of my land to the State Authority without money consideration to be used for educational, religious, charitable or public use. These supplies include roads, police stations, schools, recreational areas and other public amenities. Are these supplies subject to GST?

A: No, these are non-supplies and hence not subject to GST.

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Supply (cont’d)

Q: I have to transfer the infrastructure of utility services such as sub-stations, sewerage treatment plant and water tank to the respective utilities provider for a nominal charge. Are these transfers/ supplies subject to GST?

A: No, these are non-supplies and hence not subject to GST.

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Supply (cont’d)

Q: I charge administrative fees for services such as endorsement of deed of assignment. Is the supply subject to GST?

A: Yes, administrative services are subject to GST at standard rate.

Q: I charge interest for late payment? Is the interest subject to GST?

A: No, interest related to late payment is regarded as penalty and is considered out of scope.

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Supply (cont’d)

Q: Is the conversion premium imposed by Federal/ State Authority subject to GST?

A: No, the conversion premium and all other premium and fees imposed by Federal/ State Authority related to real estate is regarded as out of scope. Hence, is not subject to GST.

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Time of supply

Q: When do I account for GST for supply of uncompleted property under progressive payment contract?

A: You have to account for GST at various stages of progressive payment based on the earlier of : a) When tax invoice is issued; or b) When payment is received.

Q: Do I have to account for GST on booking fee?

A: No since it is not part of the consideration. However, if you receive payment upon signing of Sale and Purchase Agreement, that payment will form part payment for the sale of real property and will be subject to GST.

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Input tax credit

Q: Is the input tax incurred for the entire property development comprises of residential, commercial and industrial units recoverable?

A: No, only input tax on goods and services which will be used wholly in making taxable supplies is recoverable. Hence, in this case, only input tax for inputs used in making commercial and industrial units is recoverable. Other residual input tax is apportioned between taxable and exempt supplies.

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Input tax credit (cont’d)

Q: Can I claim input tax for the supplies incidental to the supply of the main development project e.g. landscaping, roads, school, police station & other public amenities?

A: Yes, if they are directly attributable to taxable supplies such as development of commercial or industrial properties. For input tax attributable to development of residential houses, input tax is not recoverable. Where the inputs are used for both taxable and exempt supplies, they are regarded as residual input and should be apportioned to determine the input tax claim.

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Input tax credit (cont’d)

Q: How do I claim my residual input tax?

A: The proposed fomula is as follows :- Input tax X Total value of Taxable supplies Total value of Taxable + Exempt supplies

Q: Instead of using turnover method, can use other method such as floor space?

A: Possible, but you need to apply to the Director-General of Customs Department

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Input tax credit (cont’d)

Q: Can I claim input tax on speculative supplies which are incurred in the course of investigating potential projects?

A: Where the land has not been acquired, the input tax incurred on speculative supplies such as consultant fees, feasibility study fees should be regarded as residual input tax. At the later stage when the land is acquired, input tax can be claimed if it is directly attributable to taxable supply. If it relates to mixed supply, the apportionment is required.

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Retention sum

Q: When customer pays deposit to a lawyer who acts as the developer agent, does the deposit triggers a tax point?

A: Yes, hence GST is chargeable on deposit received.

Q: When customer pays deposit to a lawyer who acts in the capacity of stakeholder, does the deposit triggers a tax point?

A: No, the tax point is not trigger until the retention sum is released.

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Liquidated damages

Q: Is there any GST implication on liquidated damages imposed for late delivery?

A: No, since it does not form part of supply.

Q: If I have to pay liquidated damages & at the same time charge the client for another supply, can I set-off each other?

A: No, you cannot reduce the value of taxable supply by setting off each other as they relate to different supplies. GST has to be accounted separately.

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Others

Q: If I supply materials and utilities and loan workers to contractors for use in my project, can I contra the value of the materials, utilities and workers from the value of construction services supplied to me?

A: No, these are regarded as two different supplies.

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Thank you