GOODS & SERVICES TAX

The goods & services tax (GST) will be introduced in Malaysia with effect from 1.4.2015.  All businesses with annual sales turnover of RM500,000 and above are required to be registered with the Customs Department before the commencement of the introduction of the GST.  Businesses which have not reached the threshold of RM500,000 shall apply for registration within 28 days from the end of the month in which the threshold is reached.

Scope of GST

  1. GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail; 
  2. GST is to be charged on goods and sdervices supplied within the country or imported into the country;
  3. Supplies made by the Federal and State Government departments are not within the scope of GST except for some services prescribed by the Minister of Finance;
  4. Supplies made by the local authorities and statutory bodies in relation to regulatory and enforcement functions are not within the scope of GST; and
  5. GST charged on all business inputs such as capital assets and raw materials is known as input tax whilst GST charged on all supplies made (sales) is known as output tax. For eligible businesses, the input tax incurred is fully recoverable from the Government throught the input tax credit mechanism.
  6. The standard GST rate is 6%.

Zero-Rated Supply

Zero-rated supply means goods and services sold by businesses that are charged GST at a zero rate. For such businesses, GST paid on their inputs can be claimed as credits. Examples of goods and services subject to GST at zero rate are:

  1. Agriculture products (paddy and vegetables);
  2. Foodstuff (rice, table salt, sugar, plain flour, milk and cooking flour);
  3. Livestock supplies (live animals and unprocessed meat of cattle, buffaloes, goats, sheep and swine);
  4. Poultry (live and unprocessed meat of chickens and ducks);
  5. Eggs (fresh and salted);
  6. Fish, prawns, cuttlefish, crabs, oysters, cockles and lobsters;
  7. Suply of treated water (excluding distilled water, de-ionised water, oxygenised water and mineral water) to domestic consumers;
  8. supply of the first 200 units of electricity to a domestic household for a minimum period of twenty eight days;
  9. Goods supplied to designated areas (Labuan, Langkawi and Tioman) from Malaysia; and
  10. International services.

    (Note : the above list is not exhaustive)

Exempt Supply

Exempt supply means goods and services sold by businesses that are exempted from GST. For such businesses, GST paid on their inputs cannot be claimed as credits.  Examples of goods and servies exempted from GST are as follows:

  1. Land used for residential or agricultural purposes or general use;
  2. Building used for residential purposes;
  3. Financial services;
  4. Private education services;
  5. Childcare services;
  6. Private healthcare services;
  7. Transport services;
  8. Tolled highways or bridges;
  9. Funeral, burial and cremation services; and
  10. Supplies made by societies and similar organisations.

    (Note : the above list is not exhaustive)