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The things that you should not forget after 6% GST to 0% on 1 June 2018

Effective 1 June 2018 the GST in Malaysia will be reduced from 6% to 0%, which is expected to be a temporary measure with the view of abolishing the GST altogether and the reintroduction of the Sales and Service Tax (SST) in September.

This announcement marked a historical moment for Malaysia at a global level as, so far, there has not been a single country in the world that has abolished GST after implementation.

This move was definitely welcomed by the majority of the Rakyat (people) who firmly believe that GST was one of the biggest factors that led to the change in Government for the very first time in country’s history. However, for businesses, it may be not the same because the GST was just implemented three years ago and a lot of resources were invested during this period to transition from SST to GST. Now it has to be reversed, the resources invested might be considered redundant.

GST 6% to 0%

The move to reduce the 6% to 0% may seem simple but for businesses that are GST registered, there are certain things that they should not forget after the 0% is effective.

  • Goods and Service Tax Act 2016 remains effective

The GST Act 2016 remains effective and all GST registered companies are required to continue submitting the GST-03 tax returns as usual until further notice. Other than that, as required by law, the records must be kept for seven years of its validity period.

  • Supply made before 1 June and tax invoice issued after that

Transitional issues where if the supply of goods were made or services performed or payment received before 1 June 2018.  Any one of these factors will make the transaction subject to 6% GST even though the tax invoice is issued on / after 1 June.

  • Claiming input tax

There may be some tax invoices with 6% GST after 1 June e.g. tax invoices dated in April but it is received in June, the goods purchased which has been delivered in May but tax invoice is issued in June etc. In these circumstances the input tax is still claimable.

  • Issuing tax invoice

All GST registered companies are required to issue tax invoice with showing 0% GST on / after 1 June 2018.

  • Goods return

Goods returned to suppliers where the goods purchased at the time of GST is 6% and the goods returned to supplier at the time GST is 0%. The credit note shall be issued for these goods returned with 6% GST adjustment.

  • Payment received from trade debtors for debts before 1 June that has been owed for more than 6 months

The repayment by trade debtors where the 6% GST portion on that bad debt relief was claimed before 1 June. If the repayment takes place after 1 June, the GST registrant has to pay back the 6% GST portion.

  • Payment made to suppliers for debts before 1 June that had been owed for more than 6 months.

In contrast, if the repayment of the 6% GST portion on the acquisition of goods or services where owings to suppliers are more than six months and took place before 1 June, the payment made to suppliers to settle the amount owing to them will be entitled to claim the 6% GST portion as input tax by the GST registrant.

  • Pricing of the products

Business owners are urged to beware of the Price Control and Anti-Profiteering Regulation 2016 which covers two main categories of goods that are food and beverage and household items which includes personal care products but excludes cosmetic. If business owners are caught taking advantage of the 0% GST to make unreasonably high profits, it is considered a serious offence that will result in a fine of RM 100,000 for an individual and RM500,000 for a corporate, as a first time offender.

  • Get Updated with the latest SST developments

The Government is expected to come up with the proposal of SST soon. It may affect cost of products as opposed to GST as SST is a single level tax and it is a cost to the businesses with no input tax claimable. The tax will be embedded into the cost of products which could result in another round of price adjustments in the market.


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