GST Amendments In a Quick Look

It’s been seven months since the implementation of GST on April 1st, 2015. Since then, the new tax system has not only became a driving wheel of Malaysia’s economy but also a fact of life for businesses and consumers alike.

Throughout the second half of 2015, however, the swift adaptation for GST has become partially eclipsed by the severe drop of Ringgit currency, a phenomena blamed on many factors including the plunge in oil price. Despite the crunch, the number of GST registrants has skyrocketed to a growing number of 400,000.

In the light of these game-changing events, few amendments on certain areas were deemed necessary by the government on GST Regulations 2014 in an effort to make GST more practical for the contemporary situations.

Claiming bad debt relief

According to the item 3, 1/2014 of claiming bad debt relief, the bad debt relief

can be claimed immediately in the taxable period after the expiry of the sixth month from the date of supply. Introduced in the mid of 2015, the amendment on item no.3, 1/2014 dictates that if bad debt relief is not claimed by the supplier in the immediate taxable period immediately after the expiry of the sixth month, then the taxable person has to notify the Director General (DG) within 30 days after the expiry of the sixth month on his intention to claim at a later date.

However, if the person who has made the input tax claim but fails to pay his supplier within six months from the date of supply, he or she shall account for output tax immediately after the expiry of the sixth month

Foreign exchange

Item 6, 1/2014 of the amendments states that businesses are required to convert the foreign exchange into ringgit in the case of a supply or imported service, at the selling rate of exchange prevailing in Malaysia at the time the supply takes place.

This was amended to incorporate the case of importation of goods, at the rate of exchange determined by DG at the time applicable for the calculation of customs duty and valuation. Thus, for imported goods, regardless of whether the importer is a GST registered or not, they must use the exchange rate determined by the DG.

The amendment also allow business to convert the foreign exchange into ringgit if both the supplier and the buyer are making wholly taxable supplies and both are GST registrant.

Office holder wages

Just like goods and services, wages as well have became affected by the new amendments as state in item 8, 1/2014. The amendment determines the office holder fees that are either subject to or exempted from GST. The list of GST-exempted positions was expanded to include civil servants, company managers, hospital visitor\’s board and members of Syariah Advisor. The salaries of tax consultant, medical specialists, economists and accountants nonetheless have remained subject to GST.

Motorcars

Motorcars exclusively used for business purposes fall under of goods regulated by the new GST amendments. The motorcars cars that might be excepted from GST includes:

1. Test Drive cars: cars used for a limited period in order to assess its performance and reliability.
2. Cars employed for security purposes: e.g. armored vehicles used by banks.
3. Cars used in providing technical assistance: a car used mainly in providing technical assistance to company’s clients e.g. maintenance services, breakdown services and repair services.
4. Cars that are critical in the running of a business: and the business cannot continue without them. Such business mainly requires the use of passenger cars e.g. leasing of cars, taxi rental business or food delivery services.

However, to be eligible for the Director General\’s approval, any motorcars above must be:

1. Registered in the name of the company,
2. Not available for private use.
3. Kept at business premises and only used for business trips
4. Has business’s name or company’s LOGO must be printed on its body.

Sales Tax Refund

Business owners and suppliers are eligible for a refund of sales tax they made a purchase and paid a big amount of sales tax or paid sales tax in an error. Under section 190 GSTA, a person is entitled for a special refund of 20% up to 100% if:

1. The goods in his or her possession are taxable under the Sales Tax Act 1972.
2. The sales tax charged on such goods (as shown on the invoice) has been paid by the claimant before 1st April 2015.

Nonetheless, if there is a credit term given by the supplier, the special refund is allowed to be claimed only if the total value of the invoice has been paid before 30th June 2015.

Land development

The initial GST regulations dictates the when a land development agreement is made between a land owner and a developer, the land owner (if registered) must charge GST to the developer for the supply of land at the gross development value (GDV) and account the GST. The developer, on the other hand, must account the GST on the supply of construction services and other services to the land owner at the gross development cost (GDC). As the parties in the agreement agreed that the developer be responsible for the costs and expenses necessary in the proposed development.

The amendment introduced states that the developer must charge GST on the supply of the developed building and issue a tax invoice on at the gross development value (GDV) in his name to the end buyer and account the GST. Furthermore, the developer is also obliged to charge GST to the land owner on marketing services supplied to the land owner and account the GST (if the developer market the developed property belongs to the land owner.

Source: Kastam Diraja Malaysia