Malaysian GST : Basic GST model in Malaysia

What is GST ?  Basic GST model in Malaysia

• GST is also known as VAT (value added tax)  in many countries. 
   It is a multi-stage consumption tax on goods and services
  
• GST is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution.
  
  Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. The input tax incurred at the previous stage is always deducted by the businesses at the next step in the supply chain
  The end user or consumer is the one who finally bear the Goods and Services Tax.  
  
• GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.

•  The basic fundamental of GST is its self-policing features which allow the businesses to claim their Input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government’s delivery system will be further enhanced.  

How is GST charged

• GST is levied and charged on the taxable supply of goods and services made in the course or furtherance of business in Malaysia,  by a taxable person. 
  GST is also charged on the importation of goods and services.
• A taxable supply is a supply which is standard rated or zero rated. Exempt and out of scope supplies are not taxable supplies.
• GST is to be levied and charged at the proposed rate of 4% on the value of the supply. 
• GST can only to be levied and charged if the business is registered under GST. 
  A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold. 
  Businesses can apply to be registered voluntarily (so that it can claim the input tax credit).  
  Non GST-registered company cannot charge and collect GST on the supply of goods and services made to their customers. 

Definition of 'supplies' under GST  

• Standard-rated supplies

      Standard-rated supplies are taxable supplies of goods and services which are subject to a proposed rate of 4%. A taxable person who is registered under GST has to collect GST on the supply and is eligible to claim input tax credit on his business inputs in making taxable supplies. 

• Zero-rated supplies

Zero-rated supplies are specific goods and services which are subject to GST at zero percent rate.   In this respect, businesses do not collect any GST on their supplies but are entitled to claim credit on inputs used in the course or furtherance of the business. To view the full list of zero rated supplies, 

• Exempt supplies

Exempt supplies are supplies of goods or services which are not subject to GST. In this context, businesses do not collect any GST on their supplies and are not entitled to claim credit on his business inputs. To view the full list of exempt supplies,  

• Supplies not within the scope of GST

Supplies which do not fall within the charging provision of the GST Act 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.

Source:    Official website of the Malaysian Goods and Services Tax (GST).  In Malaysia, GST will be under the purview of the Royal Malaysian Customs department.

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