Malaysia Sales Tax Illustrations

Illustration 1

The Following examples illustrate how GST works for a standard &endash; rated, zero rated and exempt supply.

i. Standard Rated supply

Wood Supplier

Sales Price

GST 5%

Total inclusive of GST

RM10.00

RM  0.50               RM10.50

Furniture  Manufacturer

Sales Price

GST 5%

Total inclusive of GST

RM50.00

RM  2.50

RM52.50

Wholesaler

Sales Price

GST5%

Total inclusive of GST

RM70.00

RM  3.50

RM73.50

Retailer

Sales Price

GST 5%

Total inclusive of GST

RM100.00

RM    5.00

RM105.00

Consumer

Sales Price

GST 5%

Total inclusive of GST  RM100.00

RM    5.00

RM105.00

In the above example input tax is offset against output tax at each level of supply and the final price that the consumer has to pay is RM 105.00 (sales price + GST)

ii. Zero-rated supply

Business Entity Cost of Sales

(RM) Tax on Output

(RM) Tax on Input

(RM) Net Tax Paid

(RM)

Wood Supplier 10.00 0.50 0 0.50

Furniture Manufacturer 50.00 0 0.50 0.50

Wholesaler 70.00 0 0 0

Retailer 100.00 0 0 0

In the above example wood is standard-rated while furniture is a zero-rated supply. Therefore, GST incurred by the manufacturer on his input is refunded i.e. RM0.50 and the final price that the consumer has to pay is RM 100.00 (GST free).

iii. Exempt Supply

Business Entity Cost of Sales

(RM) Tax on Output

(RM) Tax on Input

(RM) Net Tax Paid

(RM)

Wood Supplier 10.00 0.50 0 0.50

Furniture Manufacturer 50.00 0 0.50 0

Wholesaler 70.50 0 0 0

Retailer 100.50 0 0 0

  In the above example wood is standard-rated while furniture is an exempt supply. Therefore, the manufacturer is not eligible to claim the input tax of RM 0.50. As such, the tax is embedded in the price to the customer which is RM100.50.

Illustration 2

Types of supply of goods & services

(i) Any transfer of the whole property on goods is a supply of goods.

(ii) Any transfer of any undivided share of the property or possession of goods is a supply of services.

(iii) Any transfer in the possession of goods under an agreement for sale of good or an agreement for sale of good or an agreement contemplating that the property will pass at some time in the future is supply of goods.

(iv) Where a person produces goods by applying to another person’s goods a treatment or process shall be treated as supplying those goods.

(v) Supply of power in any form (including electricity) gas, water light, heat, refrigeration, air-conditioning or ventilation is a supply of goods.

(vi) The grant, assignment or surrender of any interest in or right over land or any license to occupy land is supply of goods.

(vii) Transfer or disposal of business assets.   

Illustration 3

Tax Exempt Supplier

(i) Small business (below a certain threshold)

(ii) Most health and dental services

(iii) Most educational services

(iv) Certain supplies to charities, non-profit organization, government and other selected public service bodies.

(v) Certain financial services e.g. operation of current deposits & savings a/c, exchange of currency, credit/charge cards, loans, advances, cheques debt & equity securities.

(vi) All supplies by Federal and State Government with few exceptions

(vii) Domestic transportation of passengers e.g. KTM, LRT, buses, taxis.

(viii) Sale, lease or rental of residential land.

(ix) Sale, lease or rental of residential houses except incidental services like legal fees, agents’ commission, architect fees, maintenance, repair upkeep of premises.

Illustration 4

Zero Rated Suppliers

Examples of zero rated supplies proposed in Malaysia include the following:-

(i) Transport

-international transportation of passengers

-international transportation of freight.

(ii) Export financial services

(iii) Food for human consumption e.g. padi, rice, vegetables, livestock

(iv) Electricity &endash; first 200 units for domestic consumers

(v) Water &endash; first 15 cubic meters for domestic consumers

(vi) Export Services / International Services

- services provided wholly out of country

- export of goods

- Handling, repair and maintenance of foreign going ships/aircraft, services benefiting persons who belong in a country other than Malaysia.  

Illustration 5

Basic Rules for Voluntary Registration

Illustration 6