GST SEMINAR:

Accounting For Tax

Melaka

Briefing Agenda

1. Charging Output Tax 2. Entitlement of Input Tax 3. Apportionment Rules

4. GST Adjustments 5. Taxable period

6. Submission of GST Return 2

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Input tax and Output tax INPUT

OUTPUT

Goods (raw materials, machines and other goods) Services (rental telephone and insurance)

Business

Utilities (electricity and water)

GST on inputs

= Input tax

Goods (e.g. furniture, tableware, television) Services ( e.g. loan of mould

Claimed input tax

GST on outputs

= Output tax 4

Output Tax Scope and charge • GST is charged on  the taxable supply of goods and services  made by a taxable person  in the course or furtherance of business  in Malaysia

• GST is charged on imported goods 5

Output Tax GST charged on  taxable supplies (sales of goods or services)  deemed supplies     

disposal of business assets private use of business asset imported services goods sold in satisfaction of a debt gifts costing more than RM 500 6

Output Tax Supplies which may not be subject to GST  cash donation or grants where a person does not get benefits  compensation or liquidated damages  disbursements, dividends, loan repayments or capital injection  transfer of going concern  contribution to pension, provident or social security fund  supplies by any society or similar organization  supplies excluded from input tax credit (exempt supply)

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Issuance of Tax Invoice

Types of tax invoice when making taxable supplies  full tax invoice  simplified tax invoice

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No. 007

e-Business Sdn Bhd 1000 Jalan Tipu, Bandar Reka Negeri Sembilan

Supplier, name, address & Identification number The words “tax invoice” in a prominent place

Name and address of person being supplied

Serial number

GST No. : 01234567 No. Tel. : 06-7915566

TAX INVOICE Invoice Date : 7 th. July, 2015 Invoice to:SYARIKAT ABC Jalan 5/6, Kelana Jaya Selangor

Send to:SYARIKAT ABC

Date of invoice

Date

Your Order

Our Order

Sales Rep.

30th. June, 2015

1123

123 ABC

RAMBO

No.

Item

Unit

Description

Discounts

Taxable

Unit Price (RM)

1.

117711

10

2.

117712

100

Total Price (RM)

Box

-

6%

100

1,000

Pencils

-

6%

1000

100,000

Subtotal

101,000

Discount

1,000

Subtotal

100,000

CONFIRMATION BY 30 DAYS

GST 6%

6,000

E.OE SIGNATURE …………………………………………….

Total

Sufficient description

106,000

The total amount payable excluding tax, the rate of tax and the total tax chargeable shown as a separate amount. The total amount payable including the total tax chargeable 9

Example of Tax Invoice for Mixed Supplies Name, address of supplier

Tax Invoice No. 00779

TAX INVOICE in a prominent place

Syarikat Pemaju Hartanah Sdn Bhd Lot 123, Jalan Meru, 43120 Klang Selangor

Serialized tax invoice number

GST No. : 0001111 GST Registration number

No. Tel. : 03-67868686

TAX INVOICE Invoice Date : 7 th. July, 2016

Name, address of customer

Invoice to:SYARIKAT MANA DIA Jalan 7/7, Ipoh Perak

Date of invoice

No.

Description

Quantity

Unit Price (RM)

1.

Shop houses (6% GST)

2

350,000

700,000

2.

Double story terrace houses (exempt)

10

250,000

2,500,000

Subtotal

Description of goods supplied

Quantity of goods

Add GST @ 6% Total Sales

Rate of GST

Total Price (RM)

3,200,000 42,000 3,242,000

…………………………………………………….. SYARIKAT PEMAJU HARTANAH SDN BHD

Total charge made excluding GST

Total charge made including GST 10

Other Examples of Tax Invoice C SERVICES & TRADING 30, Jalan 37, Taman Awam BANDAR BARU SALAK JAYA 43900 SEPANG Supplier Identification

GST REG. 1234-567 Phone : 03-87066078 Fax : 03-87066079 E-mail : [email protected]

CASH SALE

Date of invoice Invoice No : 11209 Date : 12.11.2015

No.

Item

Units

Description

Unit Price

Total

1

2022

1

Plasma TV Somy 56 inches

8999.00

8999.00

Sufficient description

Price inclusive of GST 6% (RM509.94)

Price

8999.00

Discount

500.00

Subtotal

8499.00

Total

9008.94

The total amount payable including tax

Issued by : juali 11

SIMPLIFIED TAX INVOICE (TAXABLE SUPPLIES – 2 rates)

Supplier’s name, address and GST identification number

AGRO SHOPPING CENTRE SDN BHD DESA PINGGIRAN PUTRA, SG. MERAB TEL: 03 – 8896XXXX FAX: 03 – 896XXXX GST Reg. No ………………… Date: 30/3/2016 15:35:45

Tax invoice serial number

:

Invoice No: V001619

Date of Tax Invoice

Description of goods or services supplied

BISCUITS PNKL [PACK] 010611

1

3.90

3.90 S

PRINGLES SC 182G [PCS] 001002

1

6.90

6.90 S

SUGAR 123235

2

1.45

2.90 Z

Item Count Total Sales Inclusive GST @ 6% Rounding Adjustment Cash Balance Rate of GST GST analysis S = 6% Z = 0% Print Salesperson

Goods 10.80 2.90 : 30/3/2016

: Aminah

4 14.35 0.00 15.00 0.65 Tax 0.65 0.00

Indicator for standard rated supply

Indicator for zero rated supply

Total amount payable including GST

Total amount of GST charged

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2 13

Allowable Input Tax Supplies  taxable supplies  standard rated or zero rated supplies

 disregarded supplies (supplies within group, supplies made in warehouse, supplies between venture operator and venturers and supplies between toll manufacturer and overseas principal)  supplies made outside Malaysia which would be taxable supplies if made in Malaysia  any other prescribed supply (Fixed Input Tax Recovery) 14

Supplies Made Outside Malaysia B

Factory

Inputs: office rental, utilities, office furniture

Purchase clothes Supplies clothes

A

Operational Headquarters issue invoices

C 15

Fixed Input Tax Recovery computer, commercial buildings, office furniture

Exempt supplies (business)

Input tax based on fixed rate

Taxable supplies (fee based services)

utilities, audit , telecommunication security services,

Recovery

Exempt supplies (non business)

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Allowable Input Tax Incidental exempt financial supplies:  deposit of money  exchange of currency

 holding of bonds or other debt securities  transfer of ownership of securities

 provision of loans, advance or credit to employees or connected persons  assignment of provision of trade receivables

 holding or transfer of trust unit  hedging of interest, commodity, utility or freight risk 17

Incidental Exempt Financial Supplies Special tax treatment does not apply to:  banks  development lenders

financial institutions or money

 insurance company  stock or futures brokers

 pawn broker or hire purchase companies  debt factor or credit or debit card companies

 investment or unit trust or venture capital company 18

Input Tax Credit Input Tax Mechanism  Tax paid on inputs to be offset against the output tax in the relevant taxable period  Subject to a time limit of 6 years from the date of return required to be made

 Apportionment rule to apply for a mixed supply  Refund to be offset against other unpaid GST, customs and excise duties

 Net tax to be refunded within  14 working days for on-line submission  28 working days for manual submission

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Input Tax Credit Conditions:  Claimant must be a taxable person  Must have a valid tax invoice     

full tax invoice simplified tax invoice - claim the input tax up to a limit of RM30.00 if name and address of recipient is not stated in invoice (GST at 6%) invoice issued by approved person under Flat Rate Scheme Customs No 1 /Customs 9 (imported goods) document to show claimant pays imported services

 Invoice issued under the name of the claimant  Goods and services acquired are not subject to any input tax restriction e.g., motorcars  Good and services are acquired for the purpose of making taxable supply 20

Non Allowable Input Tax Blocked input tax  passenger motor cars including hiring of car

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Blocked Input Tax Family benefits 

any benefits (including hospitality of any kind) provided by the taxable person for the benefit of any person who is the wife, husband, child or relative of any person employed by the taxable person for the purposes of any business carried on or to be carried on by the taxable person

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Blocked Input Tax Club subscription fee 

any joining fee, subscription fee, membership fee, transfer fee or other consideration charged by any club, association, society or organization established principally for recreational or sporting purposes or by the transferor of the membership or such club, association, society or organization

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Blocked Input Tax medical and personal accident insurance

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Blocked Input Tax Medical expenses 

any

medical

expenses

in

connection with the provision of

medical treatment to any person employed by a taxable person 25

Blocked Input Tax Entertainment expenses Spouse or family members Potential clients

Employees

Clients

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Apportionment Rules 

No apportionment if can attribute wholly full input tax if wholly attributable to taxable supplies

no input tax if wholly attributable to exempt supplies 

Apportionment rules applicable when goods and services are used for both taxable and non-taxable supplies 28

Apportionment Rules Inputs used Wholly attributable to taxable supplies Claim 100% input tax

Wholly attributable to exempt supplies

Attributable to both taxable and exempt supplies

Cannot claim input tax

Apportionment rules apply 29

Apportionment Rules Mechanism for input tax apportionment  Turnover-based method as a standard method for apportioning any residual input Taxable portion =

Value of taxable supplies Value of all supplies

 round up or down to the nearest two decimal places Input tax claimable = Taxable portion X Residual input tax 30

Apportionment Rules RESIDUAL INPUT TAX 

input tax that is attributable to making both taxable and exempt supplies Eg. A train company that supplies both taxable supply ie. freight services and exempt supply ie. passenger transportation. INPUT TAX ATTRIBUTED TO :-

TYPES OF INPUTS

Taxable supply – freight services

Repair service to the freight coach or wheels

Exempt supply – passenger transportation

Train seats, television, curtains, bunks, etc.

Both supplies (taxable and exempt) Electricity, water, maintenance services, telecommunication services 31

Apportionment Rules Example: Taxable supplies = RM300,000 Exempt supplies = RM250,000

Residual input tax = RM8,000 Taxable portion =

RM300,000 RM300,000 + RM250,000

= 54.5454% = 54.55% (2 decimal places) Input tax claimable

= 54.55% X RM8,000

= RM4,364

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Apportionment Rules Standard method  must reflect correct proportion to which the inputs are put to use  if does not reflect correct proportion, use alternative methods  floor space method  transaction based method  input base method  cost centre accounting method  employee time method  use of alternative methods requires prior approval

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Apportionment Rules Example: A finance company Arus Sdn Bhd. deals in taxable leasing and exempt personal loans services. The value and number of transaction of taxable and exempt supplies are as follows: Activities Leasing agreements entered into Personal loans entered into TOTAL

No. of Transactions

%

Value (RM)

%

75

60

750,000

42.9

50

40

1,000,000

57.1

125

100

1,750,000

100 34

Apportionment Rules De Minimis Limit Exempt input tax can be recovered in full if the total value of exempt supply is less than a prescribed amount  Prescribed amount

 total value of the exempt supplies does not exceed  an average of RM5,000 per month and  not exceeding 5% of the total value of total supplies (all taxable and exempt supplies) made in that period Example: Factory provides transport (workers bus) to his workers for a charge 35

De Minimis Limit Example 1 : A manufacturing company provides bus transportation to its workers and charges them. Activity

Taxable

Exempt

%

Value (RM)

150,000

4,000

2.6

Full recovery of input tax allowed

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De Minimis Limit Example 2 : A manufacturing company provides bus transportation to its workers and charges them. Activity

Taxable

Exempt

%

Value (RM)

500,000

10,000

2.0

Full recovery of input tax are not allowed, have to apply apportionment rule on ITC Residual Input Tax

Taxable Supplies

Exempted Supplies

ITC Claimable

Total Input Tax

RM500

RM500,000

RM10,000

98%

RM490.00 37

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Adjustments Adjustments to input tax and output tax  when the taxable person receives debit notes or issues credit notes  payment not received after 6 months (bad debts)  debtor has become insolvent before expiry of 6 months  payment not made for supply after six months  change of use of assets (from exempt to taxable)  change of accounting basis (e.g., payment basis to invoice basis)  annual adjustment for mixed supplier  Capital Goods Adjustment for mixed supplier (change in the proportion of use) 39

Adjustments – Credit note Adjustments due to credit note issued  credit note is issued when the amount previously invoiced is reduced or a transaction is cancelled  supplier, already accounted for output tax, reduces output tax in the return for the taxable period in which the credit note was issued  buyer, already claimed input tax, reduces input tax in the return for the taxable period in which he received the credit note 40

Adjustments – Credit note Example : Goods sold on 20.1.16 by company A to company B, amount RM1,000 plus GST 6%. Goods returned on 12.2.16 to company A, amount RM210 (inclusive GST). Credit note issued on 26.2.2016 by company A Company A (seller) {assuming company is in monthly taxable period} Output tax: RM1000 x 6% = RM60 (Jan 2016 GST return) Adjustment to reduce output tax (Feb 2016 GST return) RM210 x 6/106 = RM11.89 Actual GST paid to Customs is RM48.11 Company B (buyer) {assuming company is in monthly taxable period} Input tax: RM1000 x 6% = RM60 (Jan 2016 GST return) Adjustment to reduce input tax (Feb 2016 GST return) RM210 x 6/106 = RM11.89 Actual input tax claimed by Co. B is RM48.11 41

Adjustments – Debit note Adjustments due to debit note issued  debit note is issued when the amount previously invoiced is increased  supplier has to increase output tax in the return for the taxable period in which the debit note was issued  buyer has to increase input tax in the return for the taxable period in which he received the debit note 42

Adjustments – Debit note Example : Goods sold on 20.1.16 by company A to company B, amount RM1,000 plus GST 6%. Debit note issued on 26.2.2016 by company A for transportation charges for delivery of the goods, amount RM105 (inclusive of GST). Company A (seller) {assuming company is in monthly taxable period} Output tax: RM1000 x 6% = RM60 (Jan 2016 return) Adjustment to increase output tax (Feb 2016 return) RM105 x 6/106 = RM5.94 Actual GST paid {output tax} to Customs is RM65.94 Company B (buyer) {assuming company is in monthly taxable period} Input tax: RM1000 x 6% = RM60 (Jan 2016 GST return) Adjustment to increase input tax (Feb2016 GST return) RM105 x 6/106 = RM5.94 Actual input tax claimed by Co. B is RM65.94 43

Bad Debt Relief •Definition for Bad Debt The outstanding amount of the payment in respect of the taxable supplies including GST which is due to the person but has not been paid to and is irrecoverable by the person (SUPPLIER)

•Conditions to claim bad debt relief GST has been paid Supplier has not received any payment six months from the date of supply or the debtor has become insolvent before the period of six months has elapsed Sufficient efforts have been made to recover the 44

Claiming bad debt relief 30th. June, 2015 May’15 GST return Declaration 1st. May, 2015 Sale of goods

30th. November, 2015 Claiming of bad debt relief in the October’15 GST return

31st. October, 2015 Customer still has not paid

6 months elapsed

45

Adjustments – Bad Debts Adjustments due to bad debts  supplier is entitled to bad debts relief  supplier claims as input tax in the return for the taxable period in which the bad debts are given relief  output tax amount to be claimed back as input tax A1 x C input tax = B where A1 is the payment not received in respect of the taxable supply B is the consideration for the taxable supply C is the tax due and payable on the taxable supply

 customer must account as output tax in the return for the taxable period in which the bad debts are given relief 46

Adjustments – Bad Debts Payment not received ARUS Sdn Bhd made a supply and issued a tax invoice on 5.2.16 to RBS Sdn.Bhd for RM21,200 inclusive GST 6% (RM20,000+RM1,200

GST). Tax has been accounted by ARUS Sdn Bhd for the month of Feb. Part payment of RM12,000 (inclusive of GST RM679.25) for the supply was received on 12.5.16. Balance payment RM 9,200 was not received after six months from the date of tax invoice issued. ARUS can claim bad debt relief by accounting as input tax in his August return. The claimable bad debt relief is as follows:RM 9,200 RM21,200

x RM1,200 = RM 520.75 47

Adjustments – Bad Debts Adjustments due to payment received in respect of bad debts  supplier has made the claim for bad debt relief  subsequently customer paid the debt  supplier accounts as output tax in the return for the taxable period in which the payment is made  output tax amount to account

output tax =

A2 B

x C

where A2 is the payment received in respect of the taxable supply B is the consideration for the taxable supply C is the tax due and payable on the taxable supply 48

Adjustments – Bad Debts Payment received after six months Please refer to the same example of ARUS Sdn Bhd. Assuming the customer pays the balance of RM 9,200 (inclusive tax of RM520.75) on 5.11.2016 (after the expiry of 6 months from the date of supply). ARUS must account for output tax calculated as follows:RM 9,200 x RM 1,200 = RM 520.75 RM21,200

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Taxable period • Regular interval period where a taxable person accounts and pays GST to the government

• The taxable period will be determined at the time when the GST registration is approved →quarterly basis  for businesses with annual turnover not exceeding RM5 million

→monthly basis  for businesses with annual turnover exceeding RM5 million

• A taxable person may apply to be placed in any other category other than his pre-determined taxable period

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Submission of GST Returns Filing of Returns  GST returns and payments must be submitted not later than the last day of the month following the end of the taxable period  Electronic filing encouraged

is 53

Submission of GST Returns

54

Submission of GST Returns When to submit GST Return  monthly taxable period

 quarterly taxable period

55

Submission of GST Returns GST charged on taxable supplies

Output Tax

less

GST paid on business purchases

Input Tax

equal minus (-)

Refund to taxable person

Net GST

plus (+)

Pay GST to Government 56

Submission of GST Returns Sample of GST Return  Calculation of output tax

• Value of taxable supplies made

RM1,000,000

1

RM 60,000

2

• Value of taxable supplies received

RM 600,000

3

• Input tax

RM 36,000

4

RM 24,000

5

• Output tax  Calculation of input tax

 Net tax payable/refundable • GST payable (2 – 4) • GST refundable (4 – 2)

6

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Submission of GST Returns Sample of GST Return  Calculation of output tax

• Value of taxable supplies made • Output tax

RM1,000,000

1

RM 60,000

2

RM1, 600,000

3

RM 96,000

4

 Calculation of input tax • Value of taxable supplies received • Input tax

 Net tax payable/refundable • GST payable (2 – 4) • GST refundable (4 – 2)

5

RM 36,000

6

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Comments and Enquiries i)

Ketua Setiausaha, Perbendaharaan Malaysia Pejabat Pelaksanaan GST Komplek Kementerian Kewangan, No.5, Persiaran Perdana, Pusat Pentadbiran Kerajaan Persekutuan Malaysia, 62596 PUTRAJAYA. Tel : 03-88823000

ii)

GST PORTAL www.gst.customs.gov.my

iii) Customs Call Centre (CCC) Tel:

03- 78067200

Fax:

03- 78067599

Email: [email protected]

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End of Presentation

Thank You

GST Special Task Force Unit Royal Malaysian Customs Department

Putrajaya

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