Good & Service Tax. Salient Features of GST. Presented by. Goh Kin Siang Deputy Director of Customs rtd ITS Management Sdn Bhd

Transcription

1 Good & Service Tax Salient Features of GST Presented by Goh Kin Siang Deputy Director of Customs rtd ITS Management Sdn Bhd

2 Agenda: Why GST? What is GST? GST Models Basic Elements of GST Registration

3 Why introduce GST? A better tax system as compared to the current indirect taxes such as: Sales tax since Service tax since

4 Current sales & service tax have some fundamental weaknesses: a) Certain goods are subject to multiple taxes; b) Problems of transfer pricing c) Price cascading d) Complicated exemption procedures such as CJ5, CJ5A, CJ5B; Credit system; Vendor system; drawback 29/99,etc; e) Various & varied sales turnover/threshold for licensing purposes. Sales Tax =RM100,000/- per year; Service tax =RM150,000/- or RM300,000/- or RM3 million or zero threshold.

5 f) Different rates of tax. Sales tax = 5%,10% or 20%; specific ( petroleum products) Service tax = 6% or RM 50/- per credit card To ensure tax compliance & minimise tax evasion & tax avoidance; Decline in import duty collection as Malaysia started full implementation of AFTA on

6 GST is a more effective taxation system simply because: It discourages tax avoidance and tax evasion Better tax revenue collection for the stake-holder Self policing ( to claim input tax paid!)

7 Service tax and its cascading effect on services acquired by an engineer and subsequent sale : Architectural Service: RM1,000 Service tax 6%=RM60.00 Surveyor fee: RM500 Service tax 6% =RM30.00 Engineer fee RM 40,000 Service tax 6% =RM2, Customer pays: RM42, & includes Service tax pays: RM60.00 RM30.00 RM Total: RM

8 What happened if you are under the GST tax regime? GST is only paid once that is at the customer s level. GST paid by the engineer to the architect and surveyor can be claimed back as his input tax on condition he is a registered person

9 GST on services acquired by an engineer and subsequent sale : Architectural Service: RM1,000 GST@6%=RM60.00 Surveyor fee: RM500 GST@ 6% =RM30.00 Engineer fee=rm i.e. RM 40, GST@6% =RM Customer pays: RM42, & includes GST pays: RM Saving: RM185.40

10 Multiple taxes under the current SST regime: XYZ cigarette manufacturer Sells a packet of cigarette: RM10.00@ Sales tax 5%=RM0.50 Selling price=rm10.50 Sales tax Purchase price: RM10.50 Profit: 2.00 Selling price: Service tax@6% 0.75 Customer pays: =RM13.25 Service tax

11 GST tax regime: XYZ cigarette manufacturer Sells a packet of cigarette: RM10.00@ GST 6%=RM0.60 Selling price=rm10.60 GST paid is not embedded and can claim back by Old Town Purchase price: RM10.00 Profit: 2.00 Selling price: GST@6% 0.72 Customer pays: =RM12.72 Saving:( )=RM0.53

12 Transfer of price Package offer: RM (service tax inclusive) includes: Chalet and boat ride Chalet : RM20.00 Boat ride Total Service tax@6%=20x 6 =RM Chalet operator transfers the actual chalet charge to boat ride (nonservice tax activity) Its called tax avoidance. But government loses in revenue collection

13 What is GST? GST stands for goods & service tax. In some countries its called valueadded tax (VAT). It is : a) A consumption tax i.e tax on expenditure. It is imposed on all sectors of the economy with the exception of medical care, financial (selective) & education; b) Multi-stage based on net value at each stage of business transaction up to the retail (consumer) level. c) Its levied on the supply of goods & services made in Malaysia by a taxable person in the course or furtherance of any business carried on by him; and d) The importation of goods & services into Malaysia

14 Currently there are more than 160 countries in the world implementing GST/VAT tax structure in one form or another. In Asia, only Brunei, Hong Kong, Myanmar & Malaysia do not have a similar tax structure enforced. Example: Singapore has a GST of 7%; Australia its 10%; United Kingdom is 5% & 20% New Zealand is 15%

15 GST Models

16 Computation of standardrated GST of 6% Taxable supply is subject to 6% GST The supplier needs to charge GST on his output & claim input tax (ITC) at each level of purchase Business entity Selling price (RM) Tax on output (RM) Tax on Input (RM) Log supplier Net Tax paid (RM) Sawn timber supplier Manufacturer of Furniture Retailer Customer pays GST collected by the Customs: GST rate: 6% 2.GST paid at each level is deductible ;3. The final customer pays GST RM54.00

17 1 Log supplier supplies log to sawn timber miller: =RM6/- 3 Furniture maker sells furniture to retailer: RM700@6% =RM42/- He claims back RM30/- 2 Sawn timber Supplies sawn timber to furniture manufacturer: RM500@6% =RM30- He claims back RM6/- 4 Retailer sells Furniture to buyer: RM900/-@6% =RM54/- He claims back RM42/- Buyer pays GST RM54 +RM900=RM 954/-

18 Computation of zero-rated GST Zero-rated GST means GST is 0% The supplier of zero-rated supply does not collect any tax on output but is allowed to claim back GST paid on input Business entity Selling price (RM) Tax on output (RM) Tax on Input (RM) Net tax paid (RM) Log supplier Sawn Timber supplier Manufacturer Of furniture (refund) Retailer Customer pays Customs refund RM6.00 to sawn timber miller 1. Assuming log subject to GST 6% 2. Sawn timber miller claims back GST 6% 3. Assuming sawn timber and furniture are zero-rated

19 Example of GST on zero-rated goods 1 Log supplier supplies log to sawn timber miller: RM100@6% =RM6/- 3 Furniture maker sells furniture to retailer: RM700 & no GST as furniture not subject to GST 2 Sawn timber Supplies sawn timber to furniture manufacturer: RM500. As sawn timber not subject to GST. He claims back RM6/- 4 Retailer sells Furniture to buyer: RM900/- & no GST as furniture not subject to GST Buyer pays RM900

20 Computation of exempt supply purchased by sawn timber supplier Business entity Selling price (RM) Tax on output (RM) Tax on input (RM) Net tax Paid (RM) Log supplier Sawn timber supplier Manufacturer Of furniture * Retailer customer pays GST collected by the Customs is RM *Sawn timber supplier is supplying exempt goods (sawn timber),so can t claim input tax; 2. Assuming log attracts GST@6% 3. sawn timber & furniture are exempt goods

21 Example of GST on exempt goods 1 3 Log supplier supplies log to sawn timber miller: RM100@6% =RM6/- Furniture maker sells furniture to retailer: RM700. No GST as furniture is exempt goods 2 Sawn timber Supplies sawn timber to furniture manufacturer: RM500. No GST as sawn timber is exempt goods He can t claim GST RM6/-.Its a cost to him 4 Retailer sells Furniture to buyer: RM900/-No GST as furniture is exempt goods Buyer pays RM900

22 GST Elements: Taxable person (Registrant) a) any person who is required under the GST Act, to register b) it includes an individual, company, sole proprietor-ship, partnership, trust, estate, society, union, club, association, organization with an annual sale turnover exceeding the threshold c) he charges & collects GST on his taxable supplies

23 Taxable period ( Sec.40(1) GST Act 20xx) a) Category A: one month ending on the last day of any month; b) Category B: three month ending on the last day of any month; c) Category C: other month as approved by the DG

24 Category A: for business with annual sales turnover exceeding RM5 million; Category B: for business with annual sales turnover not exceeding 5 million; Category C: special case as approved by the DG

25 Supply Supply includes all form of supply done for a consideration A supply includes sales of goods & provision of services A supply can be : i. Standard-rated ii. Zero-rated iii. Exempt iv. Out-of-scope

26 Standard-rated supply A standard-rated supply is a supply of goods & services made in Malaysia/imported into Malaysia. GST is chargeable at the rate of 6% (proposed) on the value of supply. Is manufactured goods standard-rated?

27 Zero-rated supply A zero-rated supply is a zero GST rate chargeable on export of goods & services. GST chargeable is 0%.Examples of zero-rated goods & services are: A event management company charges a fee for organizing a concert in Singapore A training company conducts a course in China An accountant provided accounting service for a company in Australia An architect who designs a house in Singapore,even though the design is done in Malaysia A factory exports its manufactured goods A merchant exports his goods to oversea market

28 Zero-rated supply would also includes the following ( Budget 2014)(lampiran A1 dated ) Foodstuff such as rice,sugar,flour,cooking oil,salt,live animals,meat & offal,fish & fillets,international transportation services such as transportation of passengers by sea or air, supply of treated water, excluding distilled water,de-ionised water,oxygen water & mineral water; supply of electricity for the 1 st 200KWH,etc. Is industrial manufactured goods zero-rated?

29 Exempt Supply An exempt supply is a supply of any goods or services which shall not be subject to the imposition of tax. The Minister will from time to time announce in the government gazette what are the exempt supplies

30 Budget 2014, Lampiran A2 dated Examples of exempt supplies: Domestic transportaton of passengers for mass public transport by rail, ships, boat, ferries, express bus, stage bus, workers bus, school bus, feeder bus & taxi. Highway toll; Residential property; Land for agricultural purposes; Land for general use e.g.government building & burial ground; Private health; Education; Financial services; Life insurance; Is industrial manufactured goods considered exempt goods?

31 Out-of scope supply An out-of-scope supply is a supply that falls outside the scope of GST.GST is not chargeable on this supply. Example: a. Business below threshold b. Transfer of a going concern (TOGC) c. Fine/penalties/compound d. Government supplies e. Supplies by statutory bodies with regards to regulatory & enforcement function f. Supply made outside Malaysia (Drop-shipment)

32 Deemed supply (considered taxable supply) Anything done with no consideration can be deemed to be a supply Disposal of business assets Private use of business assets Business gift more than RM500/- Donated goods

33 Place of supply A supply is only taxable if made in Malaysia. Generally speaking, goods are considered as being supplied at a place where they are removed from and services are treated as being supplied at a place where services are rendered

34 Time of supply The time of supply refers to when a supply is made for GST purposes. This will decide when a taxable person should account for GST on the supply made. See more illustration at slides below

35 Value of Supply Value of supply = consideration GST GST is charged on the value of supply of goods & services when the time of supply takes place Consideration= Includes any payment made, whether in money or other than money for the supply of goods or services

36 For standard and zero-rated registrant, GST paid is not a cost to his purchase because he can treat GST paid as his input tax claimable

37 Example: Consideration A tax invoice issued by a supplier to RR is RM (inclusive of 6% GST) and RR decides to mark up 20% on the cost of goods. GST on purchase is RM106.00x6/106= RM6.00 GST Actual cost of purchase is RM = RM He can only mark up 20% on RM and not So RR selling price is RM =RM Value GST is RM120.00x6%=RM7.20 ( Charged to the customer and RR paid to the Customs department)

38 Input tax A. GST that a taxable person pays on the goods & services purchased for the purpose of his business B GST paid by a taxable person on any importation of goods & services Output tax GST that a taxable person charges on his taxable supplies of goods & services

39 Charging and Collection of GST GST Is charged on Supply of goods & services in Malaysia Importation of goods & services into Malaysia GST is collected by the supplier who is registered with the Malaysian Customs GST is collected by the Malaysian Customs at the point of importation

40 Input tax credit (ITC) A taxable person claims as credit (ITC) any GST incurred by him in acquiring a taxable supplies for the purpose of his business ITC is claimed through a GST return (GST No.3) for the taxable period based on tax invoice received

41 Basis of GST process GST collected from customers Output tax Less GST paid on business purchases Input tax Equal Net GST If output tax Input tax Payable to Customs Refundable by Customs If output tax Input tax

42 Time of Supply General Rules: In most cases, the supply is treated as taking place at the earliest of the following events: 1. the goods are removed i.e. a. the supplier sends the goods to the customers or b. the customer collects the goods from the supplier Tax point

43 or 2. The time when the goods are made available. Example: the supplier assembles something on the customer s premises; 3. In the case of services: the time when the services are performed Tax point Tax point or 4. the supplier issued a tax invoice for that supply; or 5. the supplier receives payment for that supply

44 Example: 1/1/ Sign contract goods received/ tax invoice payment made service rendered issued When is the time of supply? The time of supply is the earliest of the 3 events i.e Thus if your accounting period covered in your GST return is ,you must account for the GST in this taxable period.

45 Exception: If the supplier issues a tax invoice within 21 days after the events in (1) or (2) or (3),then the time of supply is the date of the tax invoice.this is known as the 21 days rule This rule will not apply if event in (5) takes place the earliest. If payment is received before the events in (1) or (2) or (3) or (4),the time of supply is the date when payment receives

46 21 day rule: It is an exception to the general rule of supply as shown above. If the supplier issued a tax invoice within 21 days after the goods are removed or made available,or when the services are provided to the customer, the time of supply is the date of invoice provided payment has not been received for the supply made

47 signed contract goods delivered/ tax invoice payment services done issued received When is the time of supply? The normal rules state that the time of supply is However,as the invoice is issued within 21 days after the goods are removed or made available, or when the services are provided to the customer, the time of supply is the date of the tax invoice provided payment has not been received for the supply made

48 Why TIME OF SUPPLY is important? Because it determines when a taxable person should charge GST and account for GST in his return

49 Registration Any person is liable to register when his taxable goods & services per year exceeds the threshold (RM500,000/ per annum-proposed) If you are not a registrant, you cannot charge GST and at the same time your cannot claim input tax credit for all your purchases in making a taxable supply

50 Types of Registration Mandatory Voluntary Group Branch/divisional Partnership

51 Mandatory registration A person will be liable for registration when his taxable supplies exceed the threshold. Its an offence if you carry on business without GST registration

52 Voluntary registration A person can apply for voluntary registration if his annual taxable supplies is below the RM500, threshold.once he has been registered for GST,he must remain registered for a minimum of 2 years Benefits : Is allowed to claim Input tax credit (ITC);

53 e-registration (on line registration vie GST Portal) Website: gst.customs.gov.my

54 Late registration Person who is late in registering his business will be subject to a registration penalty from the date he should be registered to the date immediately before the date he is so registered, and this period is referred to as the late registration period

55 Deregistration ( Sec.25.1 GST Act 20xx) 1. He ceases business; 2. Taxable turnover falls below the threshold 3. Ceases making taxable supplies 4. Mandatory deregistration 5. To notify ( Form: GST Adm 4) the Customs department within 30 days after cessation of taxable business 6. Pay GST on assets & stock on hand