SOME BASIC FACTS : (DG's Decisions)


What is GST

GST which is also known as VAT or the value added tax in many countries is a multi-stage consumption tax on goods and services.

GST is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution. Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. Hence, it does not matter how many stages where a particular good and service goes through the supply chain because the input tax incurred at the previous stage is always deducted by the businesses at the next step in the supply chain.

GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except specific goods and services which are categorized under zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.

The basic fundamental of GST is its self-policing features which allow the businesses to claim their Input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government’s delivery system will be further enhanced.

We need to pay taxes so that the government can finance socio-economic development; which includes providing infrastructure, education, welfare, healthcare, national security etc.

"Over the past few decades, the worldwide trend has been for the introduction of a multi-stage GST system. Today, almost 90% of the world's populations live in countries with GST, including China, Indonesia, Thailand, Singapore and India." 

Item 3, 1/2014 - Claiming bad debt relief 

(wef 28/10/2015) : 

iii) Any individual who is not a GST registered person is treated as carrying out a business if he at any one time owns –

(a) more than 2 commercial properties;     (b) more than one acre of commercial land; OR      (c) commercial property or commercial land worth more than 2 million ringgit at market price;

(iv) Any individual mentioned in paragraph (iii) is liable to be registered as a GST registered person if –

(a) he has the intention to supply any of his commercial properties or commercial land; AND         (b) the total value of such supply exceeds the prescribed threshold in 12 months periods.

(v) ‘at any one time’ mentioned in paragraph (iii) means at any point of time in his lifetime commencing after the effective date.

(vi) Any individual is treated as carrying out a business and making a supply of taxable service if:

(a) he is supplying any lease, tenancy, easement, licence to occupy or rent ;             AND             (b) his annual turnover for such supply has exceeded the prescribed 

Item 6, 5/2015 :

Disbursement and reimbursement What is the GST treatment for disbursement and reimbursement 

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Item 6, 4/2014:

Individual supply commercial property Whether an individual has to charge GST when making a supply of his commercial property? 

(1) Recovery of expenses may be treated as disbursement or reimbursement and this will depend on whether the expenses are incurred by a principal or an agent acting on behalf of a client.

(2) GST treatment on disbursement and reimbursement are as follows –

Disbursement                          - Not a supply   -  Not entitled for input tax claim

Reimbursement                       - Is a supply       - Entitled for input tax claim

(wef 28/10/2015) 

(3) In general, to determine whether it is a disbursement or reimbursement for GST purposes, registered person must fulfill all the following criteria –

Disbursement -  Incur expenses as an agent acting on behalf of the client.  

                          -The client is the recipient of the supply (invoice is in the client’s name)  

                          - The client is the person responsible to pay for the supply

                          - The payment is authorised by the client.

                          - The client knew that the supply is made by a third party.

                          - The exact amount is claimed from client and the agent has no right to alter or add on the value of the supply.

                          - The payment is clearly an additional to the supply made to the client. 

Reimbursement   -Incur expenses as a principal.

                               - The client is not the recipient of the supply (invoice is in the principal’s name).

                               - The principal is the person responsible to pay for the supply. 

                               - The payment is not authorised by the client. 

                               - The client has no knowledge that the supply is made by a third party. 

                               - The principal has the right to alter or The principal has the right to alter or  add on the value of the supply. 

                               - The payment is for the supply made to the client. 


(wef 23/10/2015)

(ii) The bad debt relief may be claimed if –

(a) requirements under s.58 GSTA and Part X of GST Regulations 2014 are fulfilled; and

(b) The supply is made by a GST registered person to another GST registered person; and

(iii) The bad debt relief shall be claimed immediately in the taxable period after the expiry of the sixth month from the date of supply; 

(Amended on 23/3/2015)

(iii) If the 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.

(wef 28/10/2015)

(v) A GST registered person who has made the input tax claim but fails to pay his supplier within six months from the date of supply shall account for output tax immediately after the expiry of the sixth month