Q1 What is GST?
GST is a consumption tax based on the value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.
GST is a consumption tax based on the value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.
Q2 Is GST a new consumption tax?
GST will replace the present consumption tax comprising the sales tax and the service tax (SST). The difference between GST and the present consumption tax is in terms of its scope of charge which is more comprehensive, inclusive of the manufacturing and distribution stages as well as providing a tax credit claim for GST paid on business inputs. When compared with the present consumption tax system, the sales tax is imposed only at the manufacturing stage that is at the time when the goods are manufactured or when the goods are imported. On the other hand, service tax is imposed on specific services at the time when the services are provided to the consumer.
GST will replace the present consumption tax comprising the sales tax and the service tax (SST). The difference between GST and the present consumption tax is in terms of its scope of charge which is more comprehensive, inclusive of the manufacturing and distribution stages as well as providing a tax credit claim for GST paid on business inputs. When compared with the present consumption tax system, the sales tax is imposed only at the manufacturing stage that is at the time when the goods are manufactured or when the goods are imported. On the other hand, service tax is imposed on specific services at the time when the services are provided to the consumer.
Q3 Why the sales tax and service tax (SST) need to be replaced with GST?
GST is a more comprehensive, effective, transparent, and business friendly tax system. GST can overcome the various weaknesses inherent in the present consumption tax system. The inherent weaknesses under the present tax system are the cascading tax, double tax and pyramiding tax, tax erosion and leakages through transfer pricing and other means. Besides that, GST is expected to increase tax compliance and is easier to administer in view of its self policing method. Besides that, the businesses are required only to submit simplified tax returns based on prescribed formats. All records and documents relating to the relevant transaction are required to be kept in the business premises for audit by the GST auditor.
GST is a more comprehensive, effective, transparent, and business friendly tax system. GST can overcome the various weaknesses inherent in the present consumption tax system. The inherent weaknesses under the present tax system are the cascading tax, double tax and pyramiding tax, tax erosion and leakages through transfer pricing and other means. Besides that, GST is expected to increase tax compliance and is easier to administer in view of its self policing method. Besides that, the businesses are required only to submit simplified tax returns based on prescribed formats. All records and documents relating to the relevant transaction are required to be kept in the business premises for audit by the GST auditor.
Q4 What is the rate of GST that will be imposed?
The Government has fixed the GST rate at 6%.
The Government has fixed the GST rate at 6%.
Q5 When will the government implement GST?
Goods and Services Tax (GST) will be implemented with effective from 1 April 2015 and GST rate is fixed at 6 (%) per cent.
Goods and Services Tax (GST) will be implemented with effective from 1 April 2015 and GST rate is fixed at 6 (%) per cent.
Q6 How does GST work?
GST is charged and collected on all taxable goods and services produced in the country including imports. Only businesses registered under GST can charge and collect GST. GST collected on output must be remitted to the government. However, businesses are allowed to claim the input tax credit through the following mechanism and method:-
GST is charged and collected on all taxable goods and services produced in the country including imports. Only businesses registered under GST can charge and collect GST. GST collected on output must be remitted to the government. However, businesses are allowed to claim the input tax credit through the following mechanism and method:-
i. GST collected on output (output tax) is deducted against the GST paid on input (input tax).
ii. If there is excess, the amount shall be remitted to the government within the stipulated period.
iii. If there is deficit, businesses can claim for refund from the government.
ii. If there is excess, the amount shall be remitted to the government within the stipulated period.
iii. If there is deficit, businesses can claim for refund from the government.
Q7 Who will collect GST and remit to the government?
GST can only be collected by persons who are registered under GST and the tax shall be remitted to the government within the stipulated period.
GST can only be collected by persons who are registered under GST and the tax shall be remitted to the government within the stipulated period.
Q8 How will the government ensure that the business will remit the right amount of tax collected to the government?
To ensure that businesses remit the right amount of tax, the government will conduct an early detection program through desk audit and transaction audit on the tax returns submitted by businesses for every taxable period. The GST audit team will conduct field audit on records and accounts of businesses to ensure there is no tax manipulation by businesses. Besides that, the GST risk assessment system, a computerized checking system, will trigger alerts relating to high risk cases.
To ensure that businesses remit the right amount of tax, the government will conduct an early detection program through desk audit and transaction audit on the tax returns submitted by businesses for every taxable period. The GST audit team will conduct field audit on records and accounts of businesses to ensure there is no tax manipulation by businesses. Besides that, the GST risk assessment system, a computerized checking system, will trigger alerts relating to high risk cases.
Q9 Will the GST rate be increased in the near future like what has been done by the Singapore government?
The main objective of the government is to ensure the smooth and efficient implementation of the GST. The government has no plans to increase the GST rate like what has been done by the Singapore government. The government is concerned and always take into consideration the interest and welfare of the rakyat before making any policy changes. It is important to note that even though the sales tax was implemented since 1972, the rate has been increased only once in 1983, whilst the rate of service tax has never been increased since its introduction in 1975.
The main objective of the government is to ensure the smooth and efficient implementation of the GST. The government has no plans to increase the GST rate like what has been done by the Singapore government. The government is concerned and always take into consideration the interest and welfare of the rakyat before making any policy changes. It is important to note that even though the sales tax was implemented since 1972, the rate has been increased only once in 1983, whilst the rate of service tax has never been increased since its introduction in 1975.
Q10 Are all goods and services subject to GST?
In principle, GST is imposed on all goods and services produced in the country including imports. However, certain basic foodstuff likes rice, sugar, flour, cooking oil, vegetable, fish and meat, eggs and essential services such as health and private education, public transportation, residential property and agricultural land are not subject to GST. Such exemption is to ensure that the lower income group is not burdened by GST.
In principle, GST is imposed on all goods and services produced in the country including imports. However, certain basic foodstuff likes rice, sugar, flour, cooking oil, vegetable, fish and meat, eggs and essential services such as health and private education, public transportation, residential property and agricultural land are not subject to GST. Such exemption is to ensure that the lower income group is not burdened by GST.
Q11 Do I have to apply to Royal Malaysian Customs if I want to act as an agent for my overseas principal who is liable under the GST Act?
If an overseas principal is liable under the GST Act, he has to be registered through an agent appointed by him. Therefore, as a person appointed by the overseas principal, you must apply to RMC to be such agent. You need to submit supporting documents such as an authorized letter from the overseas principal. Upon such registration, you will be held accountable for GST liabilities and need to file returns on behalf of the overseas principal. You will also have to keep separate records for the non-resident. If you are a taxable person yourself, you must also register yourself separately.
If an overseas principal is liable under the GST Act, he has to be registered through an agent appointed by him. Therefore, as a person appointed by the overseas principal, you must apply to RMC to be such agent. You need to submit supporting documents such as an authorized letter from the overseas principal. Upon such registration, you will be held accountable for GST liabilities and need to file returns on behalf of the overseas principal. You will also have to keep separate records for the non-resident. If you are a taxable person yourself, you must also register yourself separately.
Q12 How do I account for GST if my client has paid less than the amount of the progress claim?
If you issue a tax invoice equivalent to the value/ amount stated in the interim certificate, but is less than the amount stated in the progress claim, you may issue a debit note and account for GST.
If you issue a tax invoice equivalent to the value/ amount stated in the interim certificate, but is less than the amount stated in the progress claim, you may issue a debit note and account for GST.
Q13 What happens if a client does not pay after the tax invoice has been issued?
You can claim bad debts relief on the GST output tax paid in respect of taxable supplies. The GST portion of the bad deft can be recovered subject to certain conditions:
You can claim bad debts relief on the GST output tax paid in respect of taxable supplies. The GST portion of the bad deft can be recovered subject to certain conditions:
(a) The tax is already paid;
(b) You have not received any payment 6 months after the supply has been made, or the debtor has become insolvent; and
(c) Sufficient efforts have been made by you to recover the debt.
(b) You have not received any payment 6 months after the supply has been made, or the debtor has become insolvent; and
(c) Sufficient efforts have been made by you to recover the debt.
Q14 Do I have to make a formal claim to recover GST due to bad debt?
No, you only need to make an adjustment by increasing your input tax in your GST return after you have satisfied all the conditions for bad debt relief.
No, you only need to make an adjustment by increasing your input tax in your GST return after you have satisfied all the conditions for bad debt relief.
Q15 What types of export document to be kept?
All documents related to exportation must be kept for a period of seven years. Any failure to do so is an offence under GST Act 20XX. Documents that have to be kept are as follows:
All documents related to exportation must be kept for a period of seven years. Any failure to do so is an offence under GST Act 20XX. Documents that have to be kept are as follows:
(a) Export declaration (K2)
(b) Sales invoices
(c) Bill of lading
(d) Shipping note
(e) Insurance note
(f) Payment document, such as documentary credit, debit advice, bank statement, etc.
(g) Debit and Credit note
(h) Tally sheet from Port Authority (I) Short ship/short landed certificate (j) Other documents related to export.
(b) Sales invoices
(c) Bill of lading
(d) Shipping note
(e) Insurance note
(f) Payment document, such as documentary credit, debit advice, bank statement, etc.
(g) Debit and Credit note
(h) Tally sheet from Port Authority (I) Short ship/short landed certificate (j) Other documents related to export.
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