June 6, 2018

Goods and Service Tax Implementation in Malaysia


Goods and Service Tax Implementation in Malaysia

The proposed announced Malaysian GST Model will be in full force by 1st April 2015 to replace the current consumption taxes of the “Sales Tax & Service Tax (SST) which has a 5% to 6% of the specific rate at various thresholds. Announced on 25th October 2013, companies will be having a total of 17 months for preparation for the GST Implementation. Companies in Malaysia can begin to register for the GST on 1st October 2014 which is 6 months before the GST implementation date and will need to do so by 1st January 2015.

The proposed Malaysian GST standard rate is charged at 6% and the threshold for purpose of registration under GST is the annual sales value of RM 500,000 which makes almost an expected percentage of 80% of businesses being excluded for this GST Implementation.

The scope of the GST implementation will be charging companies on goods & services that are:

1)      At all levels starting from production, manufacture, wholesale and retail;

2)      Supplied within the country or imported into the country;

3)      Supplies made by the Federal and State Government departments are not within the scope of GST except for some services prescribed by the Minister of Finance;

4)      Supplies made by the local authorities and statutory bodies in relation to regulatory and enforcement functions are not within the scope of GST; and

5)      GST charged on all business inputs such as capital assets and raw materials is known as input tax.

Do also note that:

1)      GST charged on all supplies made (sales) is known as output tax.

2)      For eligible businesses, the input tax incurred is fully recoverable from the Government through the input credit mechanism.

Business with zero rate supply can claim their inputs as credits which covers the following:

1)      Food Item

2)      Other goods (goods supplied to designated areas like Labuan, Langkawi and Tioman and supply of treated water to domestic consumers)

3)      Services Supplied (directly benefits a person wholly in his business capacity and not in his private or personal capacity)

Businesses that have paid their inputs that cannot be claimed as credits includes:

1)      Goods :

  • Land used for Residential Purposes
  • Land used for Agricultural Purposes
  • Land used for General Use
  • Building used for Residential Purposes

2)      Services :

  • Financial
  • Education
  • Childcare
  • Healthcare
  • Residential Land
  • Building
  • Agricultural Land
  • General Use of Land
  • Accommodation
  • Transport
  • Tolled Highway or Bridge
  • Funeral
  • Burial
  • Cremation
  • Supplies made by Societies and Similar Organizations

For more information regarding the implementation of GST in Malaysia, you can download the softcopy version at: