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Malaysia Goods and Service Tax (GST), implemented on 1st April 2015, signifies that “If you can afford it, you must be willing to pay tax for it”. It has the purpose of replacing the sales and services tax which has been levied for several years in the country. The 6% GST now replaces the sales-and-service tax which was between 5-10%. . One reason for consumption tax is that it has a wider base of tax payers. It also means that those who evade or avoid income tax, will at some point be paying tax when they spend.
How does Malaysia GST work?
Businesses that sell products or provide services are required to levy a percentage of tax on the value of the product or service. A business that collects or claims GST must produce a Tax Invoice which clearly states the price of the product or service, and the tax amount applicable to that, and the total tax. Furthermore, the Tax Invoice should display the business GST registration number.
Who can charge/collect GST?
Only businesses registered under GST are allowed to charge or collect GST. At the moment, businesses with a turnover of RM500,000.00 per annum or more are required to register for GST.
Businesses with less than the above turnover can register voluntarily. One of the reasons why a business would register voluntarily is that if your expense is higher than your income, or you engage mainly in exports. Registering for GST in this case would allow the business to claim for GST paid on purchases.
Moreover, businesses within designated areas like Labuan and Langkawi who conduct business only within or between the designated areas are not required to register.
What is the Malaysia GST Scope and Charge?
GST shall be levied and charged on the taxable supply of goods and services made in the course or furtherance of business in Malaysia by a taxable person. GST is also charged on the importation of goods and services.
A taxable supply is a supply which is standard rated or zero rated. Exempt and out of scope supplies are not taxable supplies.
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