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PowerPoint Presentation - Malaysian Institute of Accountants


									                                                                welcome to
             Session 1D

                                  Bhupinder Singh
                                  Aaron Bromley

                    Goods & Services Tax
                       (GST) Supply –
                    Time, Place and Value                           Malaysian Institute of Accountants
                                       Customs & Indirect Tax


            Bhupinder Singh
        Executive Director, Ernst & Young

              Aaron Bromley
         Senior Manager, Ernst & Young

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Scope of Tax

GST is imposed on:
• supply of goods and services in Malaysia
• importation of goods into Malaysia – GST is charged on importation
• importation of services into Malaysia – GST is charged by using
     “reverse charge” mechanism (e.g. consultancy, technical services, etc.)


    Import of Services    Import of Goods        Supply of Goods /
      Reverse charge     Physical movement of   Services in Malaysia
       mechanism                                [Belonging Concept / Where
                          Goods into Malaysia
                                                    Supplier is Located]

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Scope of Tax
• all forms of tangible goods or intangible services.
• Examples include the sale or disposition, barter, exchange,
    license, rental, lease, right to use, entry into obligations.
    E.g. Manufacture and sale of goods - - treated as a supply
        Delivery of services - - another supply

• anything which is not a supply of goods will be treated as a
    supply of service.

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Types of Supplies

All supplies fall within 4 categories:

• Standard rated              Taxable Supplies
                                                        Input tax
• Zero rated                  Taxable Supplies

• Exempt                      No GST (input tax not

• Out-of-Scope                No GST

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Types of Supplies

Examples of supply under each category:
• Standard rated    Local supply of goods / services

• Zero rated        Export sales / international services

• Exempt            Certain financial services, healthcare services,
                    education services, domestic transportation
                    of passengers for mass public transport, sales /
                    lease / rental of residential land / property

• Out-of-Scope      Transfer of business as going concern, sales
                    of property outside Malaysia, third country sales

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Time of Supply / Tax Point

As a general rule, GST has to be accounted for at the earliest of the following:

1. Basic tax point

    For goods:
     at the time of removal, or
     at the time the goods are made available to the customer.

    For services:
     performance of the service.

2. Tax invoice is issued

3. When payment (all or part) is received

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Exception: 14-Day Rule
•    If the GST invoice is issued within 14 days of the basic tax point and no payment
     has been received, then the time of supply is the date of the GST invoice, unless
     the taxable person elects not to use this 14-day rule.

                      Normal Rule                               14-Day Rule

          20 Jun 2007          25 Aug 2007          20 Jun 2007         1 Jul 2004

           Goods                    Payment          Goods             Tax Invoice
          Delivered                  Made           Delivered            Issued

           When do you pay GST?                     When do you pay GST?

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Place of Supply

•    Place of supply is important as GST is charges on supply of goods /
     services made in the country (i.e. Malaysia)

•    Place of supply for:

       Goods               A supply of goods is treated as made in Malaysia if
                            the supply originates from a place in Malaysia. The place of
                            supply is where the goods are removed or made available to
                            the customers.
                             Goods manufactured and sold in Malaysia - - Standard Rated
                             Goods manufactured in Malaysia and exported - - Zero Rated

       Services            A supply of services is treated as made in Malaysia
                            if the supplier has a business establishment or fixed
                            establishment in Malaysia otherwise if his usual place of
                            residence is in Malaysia.

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GST Considerations:
Drop Shipment

        Coy A                                                Should Coy A
      (Malaysia)                                           (Malaysia) impose
                                                          GST on this invoice?

                                    Invoice @ USD6,000

Delivery of

                   Is Coy B (Japan) required to be
                   registered for GST in Malaysia?

                             Invoice @ USD10,000               Coy B
      (Malaysia)                                              (Japan)

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  GST Considerations:
  EPC Contracts – Supply and Installation of Goods

                 Coy A

                                              Sub-Contract for Installation
Delivery of Goods                              or Construction Services
    and Supply of

                           What are the GST issues?

              Customer                                          Coy B
              (Malaysia)                                      (Malaysia)
                                Provide Installation or
                                Construction Services

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 GST Considerations:
 R&D Design Services

            Coy A                                         Coy B
          (Malaysia)                                     (Japan)
                       Invoice @ USD50,000

 Perform R&D
  Services for           Should Coy A impose GST on the
Goods Located            R&D design services performed in
   in Malaysia           Malaysia but bill to Coy B (Japan)?


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GST Considerations:
Warranty Issues – Provide Repair Services

               Invoice @ USD200,000
               Price of goods sold (inclusive of warranty)

 Customer                         Coy A                        Coy B
 (Malaysia)                     (Malaysia)                    (Japan)
                Back-to-Back                   Back-to-Back
                  Warranty                       Warranty

                      Requires Coy A to provide repair
                       services to defects in Malaysia
               Charge GST to Coy B in Japan – not recoverable

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Value of Supply

• GST is charged on the value of supply of goods and
     services whenever time of supply conditions are met.

• Value of supply can be for a consideration in either:
       money (GST exclusive value + GST); or
       open market value (inclusive of GST).

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Taxable Supply - Value

Example: Supply of Goods

• 2x Widgets @ RM100.00 each   RM200.00

• Delivery of Widgets          RM 20.00

• GST –Exclusive Value         RM220.00

• GST @ 5%                     RM 11.00

• VALUE OF SUPPLY              RM233.00

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Taxable Supply – Value (Non-Monetary Consideration)
Example: “Food Co.” agrees to provide “Stadium Co.” with free product
  provided it can place advertising boards at the Stadium during

                   Supply of Product (RM1050 GST-incl Market Value)

            Food Co.                                           Stadium Co.

                Supply of Advertising (RM1050 GST-incl Market Value)

Food Co.:      DR1000 (Acquisitions)
               DR 50 (Input Tax)
                             CR1000 (Revenue)
                             CR 50 (Output Tax)

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Importations - Value

Import of motor vehicle:

• CIF Value                RM100,000
• Import Duty @80%         RM 80,000
• Excise Duty @60%                     RM108,000
• GST @5%                                          RM 14,400
• TOTAL                                            RM302,400

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 “Reverse Charge” on Imported Services - Value

• Overseas Invoice:        AUS$10,000
• Malaysian RM @ 2.8         RM28,000
• GST @ 5%                   RM 1,400

DR GST Input Cost                 1,400
      CR GST Output Cost                   1,400

Net GST Position (wholly taxable entity)        0

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     Thank you!
             If you have any questions, please contact :

       Bhupinder Singh
       Tel : (6)03 2087 4405
       Fax : (6)03 2095 7043

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