GENERAL SALES TAX

GST

Malaysia's GST 2015

Goods and Service Tax (“GST”) is governed by the Royal Malaysian Customs Department, and it is a replacement of the current Sales Tax and Service Tax. GST is a consumption tax, which means the more you consume, the more GST you need to pay.
Click on one of the sections below to read more.
GST is applicable on goods and services that are imported and/or consumed in Malaysia.

What is GST, Who Must Register, and Taxable Period & Payment Timing?

The first thing to note is that GST has no relation to the Inland Revenue Board (or LHDN) and definitely has nothing to do with your company taxes. Hence, do not expect or assume that your Accountant or Tax Agent will take care of GST for you.

Goods and Service Tax (“GST”) is governed by the Royal Malaysian Customs Department, and it is a replacement of the current Sales Tax and Service Tax. GST is a consumption tax, which means the more you consume, the more GST you need to pay.

WHO MUST REGISTER?

As a general rule, all Taxable Persons generating annual revenue exceeding the Threshold of RM500, 000 is MANDATORY to register. Those annual revenue below RM500, 000 may register on voluntary basis.
Taxable Person means any enterprises, companies or natural persons.
Taxable persons act as collection agent for the Customs Department. All GST collected from the customers will be paid to the Customs. GST paid to suppliers can be used to offset against the GST payable to the Customs.
GST billed to customers is called Output Tax whereas GST paid to suppliers is called Input Tax.
When Output Tax > Input Tax : Difference will be paid to the Customs Department
When Output Tax < Input Tax : Difference will be refunded from the Customs Department


Taxable Period refers to the regular period where GST is computed.
For annual revenue not exceeding RM5 million, the taxable period is quarterly and for annual revenue exceeding RM5 million, the taxable period is monthly.
Payment must be made on or before the last day of the month following the taxable period. Example, if the taxable period is January to March, it means that payment must be made no later than 30 April.
Refund takes 14 days via online submission, and 28 days via manual submission.

How does GST work?

Are all products and services subject to GST?
No, not all products and services are subject to GST. Broadly there are 3 categories:
• Standard rated.
These are products or services that will attract GST
• Zero rated.
Products or services that would be considered standard rated but do not attract GST, such as products or services supplied overseas. Zero rated transactions will still have to be reported in GST returns.Some examples of zero rated products or services include:
• Exports – goods, services
• Agriculture products – padi, fresh vegetables
• Foodstuff – rice, sugar, table salt, plain flour, cooking oil
• Livestock supplies – live animals, meat of cattle, buffaloes, goat, sheep and swine (fresh or frozen)
• Poultry – live and unprocessed meat of chicken and duck
• Egg (fresh or salted) and fish
• Electricity supply to domestic users – first 200 units
• Supply of treated water to domestic users
• Exempt.
These are products or services that have been explicitly stated as not included in GST. Some examples include Government services, Public transport, certain essential food items, electricity for domestic use, etc.
• Sale and lease of residential property
• Financial services (including life insurance and family takaful)
• Toll highway
• Private health and education
• Domestic transportation of passengers for mass public transport by rail (KTM, LRT, ERL, Monorail, ships, boats, ferries, express buses, school buses, feeder buses and taxies)
• Land for agricultural purposes and land for general use (Government building and burial plots)

NON ALLOWABLE INPUT TAX

While is general, input tax is claimable under Standard and Zero-rated supplies, there are certain instances where Input Taxes are blocked, i.e. Not claimable. They are the followings:-

  • Purchase and/hire of passenger cars
  • Benefits given to family members of employees
  • Club fees (joining or subscription) for recreational/sporting purposes
  • Medical and personal accident insurance
  • Entertaining family members and potential clients
This list is not exhaustive.

BAD DEBTS RELIEF

Bad debt relief is given to the Taxable Person in situation where no payment was received after 6 months from Date of Supply. This relief is allowed on condition that GST has been paid and sufficient efforts have been made to recover the debt.

RECORD KEEPING

Records must be kept in the principal place of business for at least 7 years, either in soft or hard copy, and they must be either in Bahasa Malaysia or English

OFFENCES & PENALTIES

Late Registration
• Within 30 days – Minimum RM1,500
• Exceeding 360 days – Maximum RM20,000
• Imprisonment: 3 Years or Both
Incorrect Returns
• Maximum RM50,000 per offence
(with potential RM600,000 payable on penalties per year)

Transactional Offences

• Maximum RM30,000 per offence
Late Payment
• Maximum 20% on any tax outstanding