Goods & Services Tax (GST)

Criteria for GST Registration for Business

Under Goods & Services Tax (GST) system in Malaysia, businesses with annual sales of RM500,000 or more, oblige to be registered under the GST. If your business annual sales do not exceed this amount, you are not required to register for GST.

Such businesses can apply for voluntary registration. However, once registered, the businesses must remain in the system, for at least 2 years. On top of that, the business required to charge and collect GST on the taxable supplies and entitled to claim input tax credit.

To determine whether your business obliges to register for GST, a calculation is made base on previous 12 months and forecast next 12-month sales. The annual sales of RM500,000 threshold deem reach when the sales records for the past 12 months and estimated sales for the next 12 months reach this figure.

The annual threshold of is fixed at RM500,000 to ensure that the small businesses are GST-free and are not required to bear the costs of registration (start-up cost up cost and compliance cost) under the GST.

Based on studies, it is estimated that about 78% of the total business establishments will not fall within the GST system. As such the consumers have the choice of making their purchases of basic needs from the businesses which do not charge the GST.

With this in mind, the consumers in the rural areas will not be burdened by the GST.

Malaysia GST – Types of Supply

Goods & Services Tax (GST)

Under the scope of Goods and Services Tax (GST) in Malaysia, supplies fall into 4 categories. They are, standard rated supplies, zero rated supplies, exempt supplies and supplies not within the scope of GST. Goods and Services that fall under each category predetermined by the Royal Custom Department of Malaysia.

Below is the explanation of each category.

1. Standard Rated Supplies

Standard rated supplies are referring to taxable goods and services, which are subject to a standard rate of 6%.

Any taxable person or company who is registered under GST requires to collect GST on behalf of the government on their sales of the supplies. The person or company is eligible to claim input GST credit on the business inputs in making the said supplies.

For the consumers, they can identify the standard rated supplies by looking at the receipt when making the purchase. Normally, standard rated supplies GST labelled with an “S”.

The examples of standard rated supplies are local supply of goods or services, supply of land and building for commercial and construction of all types of building.

2. Zero Rated Supplies

Zero rated supplies are referring to taxable goods and services, which are subject to a tax rate of 0%.

Within this category, taxable person or company who is registered under GST does not require to collect any GST on their sales. However, the said person or company is eligible to claim input GST credit on the business inputs in making the said supplies.

For the consumers, they can identify the zero rated supplies by looking at the receipt when making the purchase. Normally, zero rated supplies GST labelled with a “Z”.

The examples of zero rated supplies are goods such as basic food and utilities such as beef, rice, sugar, water for domestic use and first 200 units of electricity per months for domestic use.

3. Exempt Supplies

Exempt supplies are referring to goods and services, which are not subject to GST.

Within this category, taxable person or company who is registered under GST does not required to collect any GST on their sales nor eligible to claim input GST credit on the business inputs in making the said supplies.

For the consumers, they can identify the zero rated supplies by looking at the receipt when making the purchase. Normally, exempt rated supplies GST labelled with a “Z”.

The examples of exempt supplies are transport services, toll or highway and certain financial services.

4. Supplies not within the scope of GST

This category refers to supplies, which do not fall within the charging provision of the GST Act.

The example include non-business transactions, sale of goods from a place outside Malaysia to another place outside Malaysia as well as services provided by the Government sector.

Summary

Type of Supplies	GST Rate	Input GST
Standard Rated	6%	Claimable
Zero Rated	0%	Claimable
Exempt	Not Charged	Not Claimable