Goods and Services Tax (Malaysia)
The Goods and Services Tax (GST) is an abolished value-added tax in Malaysia. GST is levied on most transactions in the production process, but is refunded with exception of Blocked Input Tax, to all parties in the chain of production other than the final consumer.
The existing standard rate for GST effective from 1 April 2015 is 6%. Many domestically consumed items such as fresh foods, water and electricity are zero-rated, while some supplies such as education and health services are GST exempted.
The unpopular tax will be reduced to 0% on 1 June 2018. Government of Malaysia tabled for first reading Bill to repeal GST in Parliament on 31 July 2018 (Dewan Rakyat). GST is replaced with Sales Tax and Service Tax starting 1 September 2018.
GST was scheduled to be implemented by the government during the third quarter of 2011, but the implementation was delayed until 1 April 2015. Its purpose is to replace the sales and service tax which has been used in the country for several decades. The government is seeking additional revenue to offset its budget deficit and reduce its dependence on revenue from Petronas, Malaysia's state-owned oil company. The 6% tax will replace a sales-and-service tax of between 5–15%.
The Goods and Services Tax Bill 2009 was tabled for its first reading at the Dewan Rakyat (the lower house of the Malaysian parliament) on 16 December 2009. It was delayed amid mounting criticism. The government responded by asserting that the tax on oil income will not be sustainable in the future. National Consumer Complaints Centre head Muhammad Sha’ani Abdullah has said, “The government should create more awareness on what the GST is. The public cannot be blamed for their lack of understanding, and thus, their fears”. Sha’ani says that the GST will improve accounting, reduce tax fraud, and facilitate enforcement of the upcoming Anti-Profiteering Act. Muslim Consumer Association of Malaysia leader Datuk Dr. Ma’amor Osman said the GST could help end dishonest business practices, but expressed concern about how the tax would be applied to medical products and services. A group leading the campaign against the GST, Protes (which objects to the GST because of concerns about its effects on low-income Malaysians), cancelled a planned protest but has stated that they will continue to agitate against the legislation.
During the government reading of the 2015 budget, Malaysian Prime Minister Najib Razak announced a GST tax of 6% starting on 1 April 2015. This will replace the Sales and Services Tax. Implementing GST tax will be a part of the Government’s tax reform program to enhance the capability, effectiveness and transparency of tax administration and management. The GST was implemented on 1 April 2015.
By June 2015, worldwide crude oil prices fell to half its value, with several nations & oil industries considering it a crisis. The income from the newly implemented GST managed to supplant Malaysia's national budget from the deficit induced by a loss in oil tax revenue. On 7 March 2016, the Yang di-Pertuan Agong Abdul Halim congratulated the government for implementing GST.
By May 2018, the new Malaysian government, led by Mahathir Mohamad, decided to reintroduce the Sales and Services tax after completely scrapping GST. The GST standard rate has been revised to 0% beginning the 1st of June 2018, pending the total removal of the Goods and Services Tax Act in parliament.
Zero-rated and exempted supplies
Certain good and services, mainly for domestic use and essential services, are categorized as zero-rated supplies and exempted supplies. Zero-rated supplies are taxable supplies that are taxed at a GST of 0%; exempted supplies are non-taxable supplies that are not subjected to GST. While the net effect on consumers for both zero-rated and exempted supplies is the same, i.e. consumers do not pay any GST, the difference lies in the input tax credit claim by businesses. For zero-rated supplies, while GST is charged at the zero rate to the end consumer, businesses may claim input tax credit on the GST incurred in producing the supplies. On the other hand, for exempted supplies, businesses cannot charge GST to the end consumer, and they are not eligible to claim input tax credit on the GST incurred in producing the supplies.
Examples of zero-rated supplies:
- Agricultural products – paddy, fresh or chilled vegetables, certain provisionally preserved vegetables
- Essential foodstuff – oils, salt, flour, etc.
- Livestocks and livestock supplies or poultry – live animals and unprocessed meat
- Fish – live, fresh, frozen and dried
- First 300 kwh of electricity for domestic use
- Water for domestic users
- Goods supplied to designated areas from Malaysia – Labuan, Langkawi & Tioman
- Exported goods
- Exported services – such as architecture services in connection with land outside Malaysia
- Selected services in Malaysia – such as pilotage, salvage or towage services
- International services – such as transport of passengers or goods from a place in Malaysia to a place outside Malaysia
- RON95 petrol, diesel and LPG
- Sale of Residential Property
- Services provided by Government which are not considered commercial services, such as permits, licences etc. Services considered commercial are TV advertisement, rental of equipments, rental of multifunction halls etc.
Examples of exempted supplies:
- Financial Services
- Public Transport Services
- Private Education Services
- Tolled Highways or Bridges
- Childcare Services
- Funeral, Burial and Cremation Services
- Private Healthcare Services
- Supplies Made by Societies
- Residential Land or Building
- Agriculture or General Use Land
- Goods and Services Tax (India)
- Goods and Services Tax (Australia)
- Goods and Services Tax (Canada)
- Goods and Services Tax (New Zealand)
- Goods and Services Tax (Singapore)
- "Malaysia to remove GST for consumers on Jun 1". Channel NewsAsia. Mediacorp. 16 May 2018. Retrieved 26 June 2018.
- "Bill to repeal GST tabled in Parliament for first reading". The Star.
- "Govt may impose GST at 4%: Husni". SinChew. 26 November 2009. Retrieved 26 February 2010.
- "GST Implementation Is To Place Malaysia At Par With Developed Countries, Says Ahmad Husni". Bernama. 19 February 2010. Retrieved 26 February 2010.
- "GST May Bring Down Other Forms Of Taxation, Says MIER". Bernama. 11 February 2010. Retrieved 26 February 2010.
- "Parliament: GST Bill tabled for first reading (Update)". TheStar Online. 16 December 2009. Archived from the original on 21 June 2011. Retrieved 26 February 2010.
- "Finance minister: No second reading of GST Bill for now". Malaysian Insider. 14 March 2010. Archived from the original on 16 March 2010. Retrieved 15 March 2010.
- "Pakatan flays government over GST delay". Malaysian Insider. 15 March 2010. Archived from the original on 17 March 2010. Retrieved 15 March 2010.
- "Government defends GST delay, scoffs at PR's victory claims". Malaysian Insider. 15 March 2010. Archived from the original on 22 March 2010. Retrieved 15 March 2010.
- Creating awareness on GST is needed, says NGOs, by Azreen Hani. The Malay Mail, 15 March 2010
- "Pakatan MPs give budget thumbs down, say it's nothing new | Free Malaysia Today". freemalaysiatoday.com. Retrieved 11 January 2015.
- "DPM: GST will boost the economy | Free Malaysia Today". freemalaysiatoday.com. Retrieved 11 January 2015.
- "Malaysia to introduce GST at 6% from April 2015 - SE Asia - The Straits Times". straitstimes.com. Retrieved 11 January 2015.
- "Essential items, services to be exempted from Malaysia's GST - SE Asia - The Straits Times". straitstimes.com. Retrieved 11 January 2015.
- "Why Malaysia needs GST", Malaysia, 30 September 2014.
- Bowler, Tim (19 January 2015). "Falling oil prices: Who are the winners and losers?". BBC News Online. Archived from the original on 14 February 2018. Retrieved 11 November 2017.
- "PM: GST saved the economy". The Star Online. Star Media Group. 27 October 2015. Retrieved 11 November 2017.
- "Agong congratulates Najib on job well done". Malay Mail. 7 March 2016. Retrieved 11 November 2017.
- "Malaysia to introduce sales and service tax after effectively scrapping GST". The Hindu. 17 May 2018. Retrieved 26 June 2018.
- Zero-rated supplies, Royal Malaysian Customs Department GST website
- Exempt supplies, Royal Malaysian Customs Department GST website
- What is Zero-Rated Supply in GST?
- What is Exempt Supply in GST?
- Goods and Services Act 2014
- Chartered Tax Institute of Malaysia
- Goods & Services Tax at Royal Malaysian Customs Department
- Goods & Services Tax at Ministry of Finance, Malaysia
- Difference between Grade A (Advanced) and Grade B (Basic) GST Certified Vendor by Royal Malaysian Customs
- List of certified GST Vendor published by Royal Malaysian Customs
- Junior Chamber International Mines Collecting Post-GST Feedbacks