Malaysian Institute of Accountants

1. welcome to Concurrent Session 1D Bhupinder Singh Aaron Bromley Goods & Services Tax (GST) Supply – Time, Place and Value Malaysian Institute of Accountants www.mia.org.my

2. GST & SUPPLIES:TIME, PLACE & VALUE Bhupinder Singh Executive Director, Ernst & Young Aaron Bromley Senior Manager, Ernst & Young

3. GST OVERVIEW

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

5. Scope of Tax Supply: • 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.

6. Types of Supplies All supplies fall within 4 categories: • Standard rated Taxable Supplies • Zero rated Taxable Supplies • ExemptNo GST (input tax not recoverable) • Out-of-Scope No GST Input tax recoverable

7. 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

8. TIME OF SUPPLY

9. 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

10. 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. 14-Day Rule Normal Rule 20 Jun 2007 1 Jul 2004 20 Jun 2007 25 Aug 2007 Tax Invoice Issued Payment Made Goods Delivered Goods Delivered When do you pay GST? When do you pay GST?

11. PLACE OF SUPPLY

12. 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. • 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. Goods manufactured and sold in Malaysia - - Standard Rated Goods manufactured in Malaysia and exported - - Zero Rated

13. GST Considerations:Drop Shipment Coy A (Malaysia) Should Coy A (Malaysia) impose GST on this invoice? Invoice @ USD6,000 Delivery of Goods Is Coy B (Japan) required to be registered for GST in Malaysia? Coy B (Japan) Customer (Malaysia) Invoice @ USD10,000

14. GST Considerations:EPC Contracts – Supply and Installation of Goods Coy A (Japan) Sub-Contract for Installation or Construction Services Delivery of Goods and Supply of Installation Services What are the GST issues? Coy B (Malaysia) Customer (Malaysia) Provide Installation or Construction Services

15. GST Considerations:R&D Design Services Coy A (Malaysia) Coy B (Japan) Invoice @ USD50,000 Perform R&D Services for Goods Located in Malaysia Should Coy A impose GST on the R&D design services performed in Malaysia but bill to Coy B (Japan)? Customer (Malaysia)

16. GST Considerations:Warranty Issues – Provide Repair Services Invoice @ USD200,000 Price of goods sold (inclusive of warranty) Coy B (Japan) Coy A (Malaysia) Customer (Malaysia) Back-to-Back Warranty Back-to-Back Warranty Requires Coy A to provide repair services to defects in Malaysia Charge GST to Coy B in Japan – not recoverable

17. VALUE OF SUPPLY

18. 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).

19. 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

20. 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 matches. Supply of Product (RM1050 GST-incl Market Value) Food Co.: DR1000 (Acquisitions) DR 50 (Input Tax) CR1000 (Revenue) CR 50 (Output Tax) Stadium Co. Food Co. Supply of Advertising (RM1050 GST-incl Market Value)

21. Importations - Value Import of motor vehicle: • CIF Value RM100,000 • Import Duty @80% RM 80,000 RM180,000 • Excise Duty @60% RM108,000 RM288,000 • GST @5% RM 14,400 • TOTAL RM302,400

22. “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

23. Thank you!