4. GST 2015 - Mr. Mohamad Sabri Bin Saad %28RMC%29

VENUE : IMPIANA KLCC

DATE : 18 NOVEMBER 2014

Co-organised by

Ministry of International Trade and Industry (MITI) &

Korean Chamber Of Commerce Malaysia (KOCHAM)

Presenter:

Mohammad Sabri Bin Saad

Senior Assistant Director of Custom

Overview and GST Impact

to businesses

Agenda

GST- The Malaysian Model

1

2

What is GST? 3

Why GST?

GST Impacts

4

5

Conclusion 6

Introduction

Introduction

Sales Tax &

Service Tax (SST)

• 5%, 6%, 10% & specific rate

• Various threshold

Goods and Services

Tax (GST)

Rate = 6 %

Threshold = RM500,000

To replace current consumption taxes

Chargeability

GST is charged on goods and services

Supplied in Malaysia or imported

A Replacement Tax

5

Year of

Implementation

Scope of tax

Threshold

Rate of tax

1972

5%, 10% & specific

Selected goods

manufactured locally

and imported

RM100,000

Service tax Sales Tax

1975

Prescribed services

0 – RM3 millions

6% & specific

Manufacturer Wholesaler Retailer consumer

Sales tax is

imposed and

collected at the

manufacturer level

Services

provider Consumer

Service Tax is

imposed when

services is

performed

Current consumption tax

38

https://www. gst.customs.gov.my

Why GST?

8

To restructure the nation's tax structure to be more

efficient, effective, transparent , business-friendly

and capable of generating a stable revenue source

Why GST?

9

• Tax on Tax

• Transfer Pricing

• No Tax Relief On Exports

Weakness in SST

• Self policing & Increase Tax Compliance

• Less red tape

• Transparent

GST more Effective & Efficient

• Reduce dependence on income tax - 56.4% (2012)

• Reduce dependence on petroleum products - 32.6% (2012)

National Revenue

• Come out and register under the GST

• Size in Malaysia is quite big (30%) Shadow Economy

• Tourist and foreigner also have to pay GST Not only the locals

have to pay tax

Why GST?

What is GST?

11

What is GST?

• A consumption tax in the form of value added tax

each stage of business transaction up to the retail stage of

distribution

• Also known as Value Added Tax (VAT)

• GST incurred on inputs is allowed as a credit to the registrant

offset against output tax

Business

Goods

Services

INPUT OUTPUT

GST on inputs

= Input tax Claimed

input tax GST on outputs

= Output tax

Raw materials,

Rents,

Electricity,

Furniture,

Professional

services etc.

Types of

supply Output tax Input tax

Standard-rated 6% Claimable

Zero-rated 0% Claimable

Exempted No GST charged Not claimable

What is GST?

Manufacturer

Claim back GST

Wholesaler -

Claim back GST Retailer -

Claim back GST Consumer pays 6%

GST only

6%

Zero-rated supply

0%

Exempt supply

6% GST

13

How GST Works?

No GST pay by

consumer Manufacturer

Claim back GST

Wholesaler -

Claim back GST Retailer -

Claim back GST

Manufacturer

Claim back GST

Private Hospital

Cannot claim back GST

Private Hospital

does not charge

GST – consumer does

not pay any GST

GST – The Malaysian Model

Bersatu Membangun Bersama 15

Malaysia’s GST Model

Zero rated Supply (0%)

Food Items

rice , flour & Sago and peas dhal sugar & salt cooking oil ( palm oil, coconut & peanut) spices and cencalok , budu , belacan Infant milk Bread

Agricultural Products

Paddy fresh vegetables & salads All fruits

Livestock & Meat

cattle , sheep , buffalo , pigs poultry ( including eggs of poultry )

Seafood all types of seafood including dry fish & anchovy

Utility water supply (domestic) The first 300 units of electricity (domestic)

Exported goods and services

GST exempt supply

Rail Bus

Water

Transportation

Taxi / Car Rental

Toll

Residential

Land(General)

financial

institutions

education /

Health Export

Several categories of drugs zero rated (2900 drugs and medicines under National Essential Medicines are zero rated)

Medication

GST – The Malaysian Model

Budget 2015 - Goods which are subject to GST at zero rate:

White and wholemeal bread

Prescribed Medicine

Coffee powder, tea dust, cocoa powder

Yellow mee, kuey teow, laksa and meehon

Printed matters : Newspaper, reference books, text books, exercise and work books, religious text etc

Goods which are not subject to GST:

Petrol (RON 95), diesel, LPG

Government services

• No GST on the supply of goods and services made by

Federal and State Government except certain

services by government department

e.g. water supply and advertising

statutory body and local authority in respect of

its regulatory and enforcement functions

out of scope

GST – The Malaysian Model

• Special schemes –

to provide cash flow relief to businesses

to avoid double taxation

to promote tourism

GST – The Malaysian Model

GST Impact

20

SST

Cascading

No Complete Tax Relief On Export

Transfer pricing

GST

Eliminated

Export is zero rated and eligible to claim

input tax credit

GST can overcome Transfer pricing

problem in every supply chain

GST Impact – Overcome weakness

21

Impact on

Consumer Price Index (CPI)

Territory CPI

Penisular Malaysia 1.20 %

Sabah 1.02 %

Sarawak 1.03 %

Average 1.08 %

GST Impact – CPI

22

• Business becomes more competitive

GST on input is claimable

GST is no longer a business cost

Exports becomes more competitive

No element of tax embedded

Unlike SST, GST is self-policing, less human intervention with the authorities

GST Impact on Business

23

Cash flow

• GST claimable even though payment has not been made

invoice credit method

• No matching between input and output

all purchases and acquisition are readily claimable

• Special schemes/rules

ATS, ATMS, AJS, FRS, warehousing, margin scheme, group registration

• Bad debt provision

Automatic offset if no payment received after 6 months from date of supply

GST Impact on Business

Facilities for manufacturing activities:

Approved Trader Scheme (ATS) facility given to major exporters where GST on imports is

suspended

Approved Toll Manufacturer Scheme (ATMS) facility given to local toll manufacturer to disregard tax on value

added charges to overseas client

Warehousing Scheme

GST suspended in public and private warehouse

Approved Jewellers Scheme (AJS) GST suspended on gold and precious metal acquired by jewellery

manufacturers

Special Schemes

25

Sales Tax GST

Importation of goods

• Raw materials and machineries

directly used - sales tax

exemption.

• Goods which are indirectly

used for business e.g

stationeries, tires and office

equipment are subject to tax.

GST is suspended on

importation of raw materials and

machineries directly/indirectly

used in manufacturing (ATS).

Locally acquired goods from

licensed manufacturers are not

subject to Sales Tax. However, If

is acquired from the traders, the

purchase price would be

embedded with the element of

sales tax.

Locally acquisition of goods are

subject to GST. GST on inputs

are claimable.

GST Impact on Business

Reduce cost of doing business for businesses especially the

export oriented companies - LMW and FIZ

26

• Start-up cost

Not a major concern for many businesses because of the high threshold

business to install new or upgrade computer system, staff training, accounting system and book keeping

For SME free accounting software may be given by government

Tax incentive

compliance cost

Many businesses are already registered under the SST

Web based system to facilitate filing of returns at no cost

Special advisory unit especially for SMEs’

Free seminars ,training and dialogues

Industry guides

GST Impact on Business

27

Business • Reduction of corporate income tax rate by 1% from 25%

to 24%

• Reduction of corporate income tax rate for SME’s from 20% to 19%

• Reduction of co-operative income tax by 1% to 2% from 20% to 19%

• Income tax deduction for secretarial fee and tax filling fee:

secretarial fee – up to RM5,000

tax filling fee – up to RM10,000

Budget 2015 - GST Assistance Package

28

Business • Accelerated Capital Allowance on expenses for

purchase of ICT equipment and software

• Further deduction on expenses related to training on accounting software and ICT

• RM1000 cash assistance for the purchase of accounting software for SME’s

• Training grant for Income tax deduction for secretarial fee and tax filling fee:

Budget 2015 - GST Assistance Package

29

Goods and services produced

in Malaysia will become more competitive

Exports and international

services are zero-rated

Attract more tourists to visit

and shop in Malaysia

Tourist refund scheme At

international airports

Duty Free Zone

-Labuan , Langkawi and Tioman

-no GST

Computable General Equilibrium Model (CGE)

GST will boost GDP to 0.3 % → export (0.5%)

•

GST Impact on economy

Structural defects in the current tax system making Malaysia less competitive and in need of urgent Reform.

GST will make pricing mechanism in Malaysia very transparent and would benefit consumers in the long run as GST could help

to curb excessive profiteering.

GST is a prerequisite to make Malaysia a High Income Nation

Efficiency of GST would boost the Government Revenue and help to plug leakages .

SUMMARY

Thank you

32

i) Ketua Setiausaha,

Perbendaharaan Malaysia

Bahagian Cukai,

Kompleks Kementerian Kewangan,

Presint 2, 62596 PUTRAJAYA.

Tel : 03-88823000

ii) Ketua Pengarah Kastam

iii) GST PORTAL – http://www.gst.customs.gov.my

iii) Customs Call Centre (CCC)

Tel: 03- 78067200/03-88822111

Fax: 03- 78067599

Email: [email protected]

Comments, Clarifications and Suggestions