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Preview of GST in Malaysia

GST is a consumption tax on imported goods, and on supplies of goods and services in Malaysia other than those exempted or zero-rated. Effective from 1st April 2015, GST will be replacing existing Sales and Service Tax System at a rate of 6%

Steps by steps Guide for Small Business Owners

Step 1: To determine type of supply of the business is making

Generally, there are 2 types of supplies:

1. Taxable Supply
2. Exempt Supply

Most of businesses are making taxable supplies. Only few exception of business are exempted from GST, such as healthcare service provider, residential property developers and etc. You may find complete list of exempt supply from http://gst.customs.gov.my/en/rg/Pages/re_odr.aspx

In short, as long as you are in business either providing goods or services (unless specifically exempted), most of time you are making a taxable supply.

Step 2: To determine liability to register as a taxable person

If you are making a taxable supply, it’s mandatory/compulsory for you to register with Royal Custom Malaysia as a GST-registered entity as long as your annual sales turnover exceed RM500,000. The annual turnover threshold of RM500,000 can be based on historical or future method.

Once you are registered, effective from 1st April 2015 you are required to charge 6% GST on taxable supplies you made. The advantage of being a registered person is where those input tax (GST paid on purchases) are allowed to claim back.

Step 3: To register your business

Once you are satisfied that you are liable to register, you may simply log on Royal Custom Malaysia, online portal (“ Taxpayer Access Point”) – also known as TAP at http://gst.customs.gov.my/en/rg/Pages/rg_tap.aspx.

To register on TAP, you need to have following information:

1. Business registration number and/or IC Number
2. A valid email address
3. Total taxable supplies of business
4. Industry code
5. Bank account information

Registration with Royal Custom Malaysia is free of charge. Once successfully registered, you will be receiving email on your GST identification number.

Step 4: To identify/review impact GST on business and transaction

Before GST to take effect from 1st April 2015, you have to start identify the impact on your business and transaction. The impact will largely vary depending on industries and businesses. But few things to take note always:

1. Do I need to charge GST of 6% on my sale of goods/services?
2. Can I claim the GST paid on my cost?
3. Do I need to pay GST even I have not received payment from customer?
4. How GST will affect my business cash flow?
5. Is sale of property/plant (capital asset) subject to GST?

You may find some answer/insight from the GST General Guide by Royal Custom here http://gst.customs.gov.my/en/rg/Pages/rg_gg.aspx.

For complicated GST issue, you may consider engaging a GST consultant to assist you in the implementation.

Step 5: To upgrade existing accounting workflow/system and software

Business owners are required to have proper accounting system and records keeping. For example, businesses need to issue proper tax invoice to the customers with the format specified by the Royal Custom Malaysia. Besides, complete tax invoice must be available for a business to claim GST input tax.

These tasks are made easier with the use of GST-compliant accounting software, which help to facilitate the compliance with GST rules. For small businesses, a basic category of GST software is sufficient enough. For example: Quickbooks, MYOB, Sage and etc. These software with GST module are able to apply custom tax code, generate GST filing return, apply bad debt relief and etc.

You may see a complete list of GST-compliant accounting software on Royal Custom Malaysia website

Step 6: Filing of Return/Submission

Businesses with annual turnover below RM5 million is required to submit GST return every quarter; those exceeding RM5 million is required to submit GST return every month. Filing of return can be done manually or online via TAP, using GST03 Form.

In each taxable period, business compares output tax charged and input tax incurred to determine net tax payable/refundable. When output tax exceeds input tax, a net tax is payable to Custom, and vice versa. Tax filing must be done before end of the following month of each taxable period.

by Eng Guo Miao (eGST consultant)

- See more at: http://www.egst.com.my/blog/simple-guide-on-malays...