Definition of GST (according to Section 9(2) GST Act 2014)
“……tax shall be charged on any supply of goods and services made in Malaysia where it is a taxable supply made by a taxable person in the course of furtherance of any business carried on by him”.
Concept of Input Tax
6% that you have paid on your business purchases and expenses. The amount of GST incurred can be claimed from the Royal Malaysian Customs Department (RMC).
Concept of Output Tax
6% GST that you have collected from customers and to be paid to RMC, example if we bill our client Rm5,300, Rm5,000 is the agency fee whilst 6% GST is Rm300, we have to pay this output tax of Rm300 to RMC.
Tax shall be charged basing on 4 important elements:
A) Taxable supply of goods & services
B) Made by a taxable person
C) In the course of furtherance of business
D) In Malaysia
A) Taxable supply means:- a supply of goods and services which are
- Standard rated supply – such as sale & lease of commercial properties
- Zero rated supply – such as sale of properties outside of Malaysia
- Exclude exempt supply – such as sale & lease of residential or agricultural or for “general use” properties
Note: Eventhough for developer to purchase raw material for purposes of residential properties construction, GST paid on their input tax cannot be claimable. But in actual fact GST cost of goods/services provided will be embedded in the price of goods/services.
Quit rent, assessment, registration fees and so are under Out of Scope Supplies – not subject to GST
B) Made by Taxable Person
- A person who is liable to be registered under the GST Act
- Include an individual, sole proprietor, partnership, corporation, association etc
- Annual turnover exceeds the proposed threshold of Rm500,000
- Is also can be voluntary registration but after registered shall remain for a period of at least 2 years.
Note: In Malaysia, carrying business can be through business vehicles of sole proprietorship, partnership, limited liability partnership or even private limited companies (Sdn Bhd). Each of these business vehicles are termed as a separate GST entity and must be registered with the RMC individually.
Sole proprietorship is under personal name, we have to add all business income all together and if exceeded Rm500,000, have to pay GST.
C) In the course of furtherance of business
- Any trade for a profit
- A serious undertaking or work earnestly pursued
- Pursued with recognizable continuity
- Conducted in business like nature
- Predominantly concerned with making supplies for a consideration
- Making supplies of a kind commonly made by commercial organizations
D) In Malaysia
- A supply of goods and services must be made in Malaysia for GST to be chargeable. Supplies not made in Malaysia are considered to be outside the scope of GST.
Notes: If any property prices do not mentioned (Price payable is exclusive of GST) will mean the price is inclusive of GST.
Loan repayment is not subject to GST
Time of Tax Point
- Date of delivery of vacant possession or made available to deliver
- Date when payment is received
- Date when titles transfer is effected, whichever is earlier.
Supply of Goods in Property Transaction
Definition as per Clause 2(1) of first schedule of GST Act:-
Any transfer of –
The whole right of ownership of land;
Land under an agreement for the sale of such land;
Land under agreement which expressly stipulated that the ownership of such land will pass at some time in the future (subject to state consent);
Any interest under Deed of Assignment; or
Any strata title; is a supply of goods
| Types of Supply of Property |
| Standard rated supply |
Commercial Property
| Exempt Supply |
Residential Used Property
Agricultural Property
General Use eg burial ground, playground, religious property
When will Vendor/Landlord be charged GST for sale/rent of Commercial Property (Taxable Supply)?
- Vendor/Landlord must be a GST registered person (Taxable Person)
- In the course of furtherance of business of the Vendor/Landlord
- Property is located in Malaysia
Note: If a residential building built on commercial land like SOHO need to pay GST? The guideline is based on actual usage of the property like design and features. Same goes for vacant land. Residential land is exempted from GST. If SOHO is under HDA (Housing Developer Act) then it is obviously under residential usage and therefore is exempted from GST. What if is commercial usage house along Jalan Maarof? Their usage is commercial, so need to pay GST. Unless you are staying in one of the houses there and used it as residential purposes.
Can a purchaser choose not to pay GST to the vendor? Purchaser can easily check whether the vendor is registered under the GST from www.gst.customs.gov.my. Purchaser has the right to purchase the commercial properties from a non registered vendor.
Important Notes:
- A person is liable to registered if his total taxable supply of the current month and the next 11 months exceeds RM500,000.
- Any individual owning commercial property at any one time:-
- Make a supply of two commercial properties or commercial land not exceeding 1 acre would be treated as not carrying out business even if the sale is more than RM500,000 in a 12 months period;
- Would also be treated as not carrying out business if there is no intention of making a supply;
- Make a supply of rental services on such property is liable to be registered when the turnover for such supply exceeded the threshold amount of RM500,000.
GST for Rental
- GST is chargeable for commercial use rented property if the rental services on commercial property are liable to be registered when the turnover exceeded the threshold of RM500,000.
- No GST for rental derived from residential properties.
Conclusion
| Type of Property | Landlord = Registered Person | Landlord NOT Registered Person |
| Residential | Exempted | Exempted |
| Commercial | 6% GST | No GST |
