Q1: What is GST?
- The Goods and Services Tax, more commonly known as GST, is a consumption tax based on the value-added concept, replacing the sales tax and service tax. In Malaysia, GST were implemented since 1 April 2015, fixed at rate of 6%. Unlike the previous sales tax or service tax which imposes a single stage tax, GST is a multi-stage tax paid by all intermediaries at every production and distribution stage in the supply chain.
Q2: How does GST work?
- GST is charged and collected on all taxable goods and services produced in Malaysia, including imports. Only businesses registered under GST can collect GST
GST collected on output (output tax) is deducted against the GST paid on input (input tax).
Any excess output tax collected must be remitted to the government within the stipulated period.
- If there is deficit, businesses can claim for refund (input tax credit) from the government.
Q3: What is input tax, output tax and input tax credit?
- Input tax is the GST charged on the purchase of goods and services used in business activities.
- Output tax is the GST charged and collected on the sales and/or supplies of goods and services to consumers.
- Input tax credit means input tax claimable by businesses registered under GST.
Q4: What are standard rated, zero rated and exempted supplies?
- Standard rated supplies are taxable supplies of goods and services which are subject to the standard rate of 6%.
- Zero-rated supplies are taxable supplies which taxed at 0%, not subject to GST at output and input stage. Examples of zero-rated supply are paddy, fresh vegetables, live animals and exports of goods and services.
- Exempted supplies are non-taxable supplies which are not subject to GST at the output stage. For example, GST is not be imposed on piped water and first 200 units of electricity per month for domestic consumers. There is also no GST for transportation services, education and health services.
Q5: Do all businesses need to be registered under GST?
- Only businesses with annual sales turnover of RM500,000 and above are liable to be registered under GST. Businesses which have reached the RM500,000 threshold shall apply for registration within 28 days from the end of the month the threshold is reached. Late registration will lead to cumulative penalty up to RM20,000.
- Businesses with annual sales turnover less than RM500,000 may also apply for voluntary registration of GST.
Q6: Why fix the threshold at RM500,000?
- The threshold is fixed at RM500,000 to ensure that small businesses are GST-free and are not forced to bear the start-up cost and compliance cost under GST. On the other hand, this gives consumers the choice to acquire goods and services from businesses which do not charge GST.
Q7: Are all goods and services subject to GST?
- MOST good and services are subject to GST, but not all. Basic food likes rice, sugar, flour, cooking oil, vegetable, fish, meat and eggs, and essential services such as healthcare, education and public transportation are not subject to GST.
- Also, small business not registered under GST cannot charge GST on the consumers.
Q8: How to apply for GST registration?
- Online application can be made by accessing the registration form from the GST website, then submit the form directly to the One Stop Processing Centre.
- For manual application, the application form can be obtained from any Customs Office.
Q9: How does the government ensure that businesses remit the right amount of GST to the government?
- The government conducts an early detection program through desk audit and transaction audit on the tax returns submitted by businesses. The GST audit team will conduct field audit on records and accounts of businesses to ensure there is no tax manipulation by businesses. The GST risk assessment system, a computerised checking system, will trigger alerts relating to high risk cases.
Q10: What happens if businesses don’t comply with GST?
|Examples of offences
|Fine (max)||Imprisonment (max)|
|Incorrect return||RM50k||3 years|
|Evasion of tax & fraud (false account, false invoice, false records, or authorises the use of fraud etc.)||X10-X20 the amount of tax evaded.||5 years (first time offence)
7 years (second time or subsequent offence)
|Improperly obtained refund||RM50k||3 years|
|Failure to show prescribed particulars in tax invoice||RM30k||2 years|
|Failure to keep full and true records||RM30k||3 years|
|Tax amount uncertain||RM50k – RM500k||7 years|
We understand that compliance with tax system is often hard and complicated. Do contact us if you require further advice!