Manufacturing - MPMA

1 GST FOR BUSINESSES Date: 17 July 2014 Venue: Dewan Perdana MIDA MIDA Sentral Presenter: Fazilah Ariff BAHAGIAN CUKAI KEMENTERIAN KEWANGAN Manufacturing Briefing Agenda Treatment on Manufacturing related to Manufacturing for Manufacturers preparation 2 1 3 GST Treatment on Manufacturing Manufacturing Goods ( furniture, tableware, television) Services ( loan of mould INPUT OUTPUT GST on inputs = Input tax Claimed input tax GST on outputs = Output tax 4 Goods (raw materials, machines and other goods) Services (rental telephone and insurance) Utilities (electricity and water) Manufacturing 5 Liable to register for GST making taxable supplies of goods or services in Malaysia.)

2 And business taxable turnover has exceeded the prescribed threshold (RM 500,000 per year) ..section 20 Registration Registration Exemption from registration for those who are making wholly zero rated supplies Example: Sugar refiner, Flour Manufacturer Must apply GST-Adm3 form If approved, input tax incurred CANNOT be claimed Must notify DG of any change in nature of supply within 30 days from the date of change makes standard rated and zero rated supplies tapioca flour (6%), plain flour (0%) ..section 32 Generally all supplies made by manufacturers are taxable supplies, - standard rated supplies - zero rated supplies => Subject to GST on the supplies Input tax is claimable on the acquisitions GST Treatment on Supplies Made 8 Taxable supplies sale of goods ( Manufacturing products such as tableware, furniture, cooking oil and other goods scrap, used mould, used equipment/machine, ) provision of services (loan of mould)

3 Sub-contract work loan of raw materials business assets put to private use gifts exceeding RM500 GST Treatment on Supplies Made 9 Under GST, both FIZ and LMW are to be regarded as places located in Malaysia Physical control procedures will be revised to be in line with the tax treatment under GST Records are not required to be submitted monthly but must be made available as and when required by Customs Auditing by Customs will be done at random based on Risk Management System (RMS) FIZ & LMW Concept 10 Supplies made by FIZ & LMW: export is subject to zero rated local sales is subject to GST Procedures for local sales goods need to be declared in Customs Forms and subject to customs duties (if any) GST on local sales has to be imposed and charged in the tax invoice issued to the buyers: If sales to FIZ/LMW companies, the value is based on transaction value If sales to non-FIZ/ non-LMW, the value is based on value of imported goods which include customs duties(if any) GST Treatments on FIZ & LMW 11 Supplies made by LMW/FIZ company.

4 To LMW/ FIZ company subject to GST transaction value GST Treatment on Supplies Made LMW/FIZ LMW/FIZ GST Example Transaction value : RM100, GST 6% : transaction value : RM100, X 6% : RM6, 12 Special Valuation for goods supplied locally Where a taxable supply of goods is made by a person under section 65A of the Customs Act 1967 or a person operating in a free industrial zone under paragraph 10(1)(b) of the Free Zone 1990 to any person who is not licensed under section 65A of the Customs Act 1967 or to any person who is not operating in a FIZ under paragraph 10(1)(b) of the Free Zones Act 1990, the value of the goods shall be the value as determined under section 16.

5 Paragraph 7 of the Third Schedule of GST Act 2014 Special Valuation on Supplies Made 13 GST Treatment LMW LMW/FIZ Non-FIZ / Non-LMW GST Supplies made by LMW/FIZ company: To non- LMW/ non-FIZ subject to GST - the value of the goods is the value of imported goods 14 GST Treatment Special Valuation Example ABC Electronics Sdn Bhd (a company in FIZ) sold a consignment of car audio to MAC Sdn. Bhd (non-FIZ/non-LMW) at a price of RM100, (Assuming duty import =10% and GST= 6%). Transaction value : RM100, Import duty (100,000 x 10%) : RM10, GST 6% : Customs value + Import Duty : (RM100, + RM10,000) X 6% : RM6, Item Description of goods Unit Value (RM) 1.

6 Car audio 100 pcs 100, Import Duty (10%) 10, Supply made by LMW to non-FIZ /non-LMW company Import duty must be paid in Customs form GST must be charged in a tax invoice and must be paid in GST return in the relevant taxable period GST Treatment Local Supply (a) Customs form 15 GST Treatment Local Supply Item Description Of Supply Unit Price (RM) Total (RM) 100 pcs Car audio GST on value + Import Duty @ 6% on RM110, 110, 6, TOTAL AMOUNT PAYABLE 116, GST No: 003456007707 Invoice No: 007 Date: ABC Electronics Sdn Bhd Lot XX, Jalan YY, Sg Way, Petaling Jaya Selangor TAX INVOICE MAC Sdn Bhd Jalan CC, Johor Baru, Johor (b) GST on local sales charged in a tax invoice 16 17 Current treatments GST Treatments Under the Sales Tax legislation, FIZs and LMWs are deemed to be a placed outside Malaysia For GST, it is treated as a place located in Malaysia.

7 Local sales made by FIZs and LMWs are as if importation into Malaysia For GST, it is considered as local supplies and subject to normal rules. For documentary control, LMWs are required to submit monthly records but not for FIZs. For GST, FIZs and LMWs who are approved under the special schemes (ATS/ATMS) are required to submit certain records. FIZ & LMW Concept 18 Current treatments GST Treatments Importations of raw materials and machineries directly used for Manufacturing are eligible for customs duties / sales tax exemptions. Importations or acquisitions of goods indirect used for Manufacturing purposes eg stationaries, tires and office equipments are subject to tax.

8 GST on importations of goods including raw materials and machineries or locally acquisitions in the course or furtherance of businesses are subject to GST. GST on inputs are claimable. GST on importation of goods is suspended under ATS Auditing by Customs will be done at random based on risk criteria. Auditing by Customs will be done at random based on Risk Management System (RMS) Records need to kept for 6 years Records need to be kept for 7 years FIZ & LMW Concept 19 LMW COMPANIES CUSTOMS ACT 1967 IMPORT/EXPORT/LOCAL SALES PROCEDURES IMPORT INPUT - Raw materials / components - Machines / equipments OUTPUT Local Supplier FIZ LMW Others EXPORT DA FCZ (outright export) LOCAL SALES EXEMPTION; Import Duty Excise Duty GST on importations (6%) suspended under ATS Subject to GST.

9 Standard rate Subject to GST Standard rate Zero rate GST REGISTRANT / ATS LMW Company LMW / FIZ /FCZ GST incurred for making taxable supplies -Claimable GST Treatment LMW/FIZ Supply GST Treatment World to LMW/ FIZ: Goods Services *Suspended Standard Rate Between the LMW/FIZ: Goods and Services Standard Rate FIZ to World: Goods and Services Zero Rate * Under Approved Trader Scheme (ATS) - Subject to DG approval 20 GST treatment for LMW/FIZ Supply GST Treatment Non-LMW/non-FIZ to LMW/FIZ: Goods Services Standard rate Standard rate LMW/FIZ to non-LMW/non-FIZ: Goods Services *Standard rate Standard rate 21 GST Treatment LMW/FIZ * GST on value of imported goods 2 22 Matters related to Manufacturing Farming Out Within Malaysia No transfer of ownership of goods not a supply of goods Sub-contractor to account for GST on value of services supplied Supply of services ABC SDN.

10 BHD. (GST registered person) XYZ SDN. BHD. (GST registered person) Raw materials valued at RM 100,000 Farmed out Finished goods and charged RM15,000 for labour Returned 23 Farming out Outside Malaysia No GST on goods returned If new parts are added GST will be imposed (similar to item 51 of the Customs Duties (Exemption Order) GST is allowed to be suspended under ATS ABC SDN. BHD. (GST registered person) ALLAN PTE LTD Raw materials valued at RM 100,000 Farmed out Returned Finished goods and charged RM15,000 for workmanship 24 Warranty Manufacturer s warranty normally includes: the charge for after sale services and repairs any replacement of spare-parts free of charge during the warranty period Services and replacement of parts free of charge, not subject to GST Discount Discount is allowed Gift Gift of goods not more than RM500 made in the course or furtherance of business to the same person in the same year not subject to GST 25 Warranty, Discount and gift 26 Disposal of assets Sale of capital assets, other than TOGC subject to GST Sale of assets as TOGC not subject to GST (not a supply))