gst treatment on manufacturing and retail sector venue : klsfea shah alam
DESCRIPTION
GST TREATMENT ON MANUFACTURING AND RETAIL SECTOR Venue : KLSFEA Shah Alam Date : 26 February 2014 Organised by: KLSFEA Presenter: Sabariah Md Yusof. ROYAL MALAYSIAN CUSTOMS. FIZ & LMW Concept. FIZ & LMW Concept. 1. Facilities under GST. Approved Trader Scheme (ATS). - PowerPoint PPT PresentationTRANSCRIPT
GST TREATMENT ON GST TREATMENT ON MANUFACTURING AND RETAIL MANUFACTURING AND RETAIL SECTORSECTOR
Venue : KLSFEA Shah Alam
Date : 26 February 2014
Organised by: Organised by: KLSFEAKLSFEAPresenter: Sabariah Md YusofPresenter: Sabariah Md Yusof
ROYAL MALAYSIANCUSTOMS
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Current treatments GST Treatments Under Customs and 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.
Local sales made by FIZs and LMWs are as if importation into Malaysia
For GST, 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
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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.
GST is suspended on importations of raw materials and machineries directly/indirectly used for manufacturing .
GST on importations of goods or locally acquisitions in the course or furtherance of businesses are subject to GST. GST on inputs are claimable.
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
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4
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• a facility to relieve GST payment on importation of goods
• Under ATS ATS participants are allowed to suspend GST on the importation of
goods Goods imported is used in the course or furtherance of business
The amount of GST suspended needs to be declared in the GST return in the month which the importation takes place
Proposed amendment 2013:
“Sec.72(2) Any taxable person granted an approval under the Approved Trader Scheme shall declare the suspended payment of tax in the return for the taxable period to which the suspension relates”
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Approved Trader Scheme (ATS)
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AA Pte Ltd
overseas
Malaysia
Port (November 20XX)Value of imported Goods (CIF + Duty Import )= RM106000GST 6%= RM6000
XX Sdn Bhd
ATS approval
GST-03 (November 20XX)
Customs no.1
GST is suspended
Total value of goods imported under ATS= RM106,000
Total value of GST suspended= RM6000
Approved Trader Scheme
Goods cannot be suspended under ATS•Liquor, beer, wine and spirits•Tobacco and tobacco products•Blocked input tax goods•Goods for personal/non- business
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Persons eligible for ATS• Companies located within Free Industrial Zone (FIZ) • Licence Manufacturing Warehouse (LMW)• International Procurement Centre (IPC) • Regional Distribution Centre (RDC)• Toll manufacturers under ATMS• Jewellery manufacturers under AJS• Companies with turnover above RM25 million and at least
80% of their supplies made are zero-rated; or• Any other person approved by the Minister
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ATS
IMPORT
INPUT- Raw materials / components- Machines / equipments
OUTPUT
Local SupplierFIZ
LMWOthers
LMW COMPANIESSEC.65/65A CUSTOMS ACT 1967 –IMPORT/EXPORT/LOCAL SALES
PROCEDURES
EXPORTDA
FCZ (outright export)
LOCAL SALES
EXEMPTION;•Import Duty•Excise Duty GST on importations (6%)
suspended under ATS
Subject to GST;•Standard rate Subject to
- Import duty- GST at standard rate
Subject to GST•Standard rate
• Zero Rated
GST REGISTRANT /ATS
LMW Company GPB / FIZ /FCZ
GST incurred for making taxable supplies-Claimable
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Approval subject to the following criteria:
• Must be registered under Sec. 20 of the GST Act 20XX• Participant must make wholly taxable supply• Must be a registered user of electronic service• Must submit monthly GST return • Must makes declaration on the importation of goods
electronically• Must have good compliance record as a GST payer• Must have good accounting and internal control system• Must furnish security if required; and • Any other conditions as may be determined by DG
ATS
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Purpose • a facility to overcome the GST embedded when a person buys goods
from an overseas person via a local toll manufacturer
Sec. 73 (2) – Approved Toll Manufacturer Scheme (proposed amendment 2013)
Any taxable person (Toll Manufacturer) are allowed to disregard the supply of services which comprises the treatment or processing of goods to the overseas principal (who belongs to a country other than Malaysia)
Any person (belongs to Malaysia) who receives the processed goods from the toll manufacturer shall account and pay tax as if he had himself supplied and acquired the goods in the course or furtherance of his business
Approved Toll Manufacturer Scheme
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Approved Toll Manufacturer Scheme (ATMS)
Overseas Principal
Local Customer Toll Manufacturer
TM imports consigned goods from the overseas principal (ATS)
TM drop-ships finished goods to local customer of overseas principal
Malaysia
Overseas principal invoices local customer on finished goods received
TM invoices overseas principal for value-added services -disregarded1.
2.
3. 4.
Recipient accounting
Local supplier
Local supplier deliver goods on behalf of OP (ZR)
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ATMS
Eligibility for approved under the ATMS Any toll manufacturer who has contract(s) with overseas principal who
is not belong in Malaysia e.g he is not a taxable person
He carries out value added activities with the overseas principal: worth RM2 million or more (excluding the cost of raw materials
supplied or belonging to the overseas principal) per annum; and
80% of the processed goods must be exported;goods must be exported;
What types of value added activities are allowed under ATS? related to manufacturing, treatment, processing, finishing, assembling
and other manufacturing-related works on consigned goods
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ATMS
GST tax treatment for ATMS• Supply of services by toll manufacturer (TM) to overseas principal
(processing charges/toll) to be disregarded• TM deliver the processed goods on behalf of his overseas principal
to the local customer • Supply of processed goods by overseas principal to his local
customer subject to GST Local customer has to account the GST by way of recipient
accounting Need to account based on whichever is earlier:
Invoice received from overseas principal; or Payment made to overseas principal
Acquisition of goods by overseas principal Local supplies delivered to the toll manufacturer under the account
of overseas principal is zero rate
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Example: “Recipient Accounting”A Toll Manufacturer (A) approved under ATMS delivers processed goods on behalf of overseas
principal to the local customer (B) on 29 April 2015. The Overseas principal issued an invoice to local Customer (B) with the amount of RM200,000.00 on 5 May 2015
How to account for the tax?
OUTPUT TAX = RM12,000
INPUT TAX = RM12,000
GST Return - May 2015(GST-03)
ATMS
Local Customer (registered person) Needs to account the tax amounting RM12,000 (6%XRM200,000.00) in his GST return.
Local customer (not a registered person)Needs to account the tax not later than the last day of the subsequent month from the month in which the supply is made
*GST No.4 - May 2015
Value of supply RM200,000.00
GST amount payable RM12,000.00
*Return for non-registrant
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ATMS
Approval subject to the following criteria: Must be registered under Sec. 20 of the GST Act
Must be a registered user of electronic service
Must submit monthly GST return
Must have good compliance record as a GST payer
Must have good accounting and internal control system
Must furnish security if required; and
Any other conditions as may be determined by DG
Warehousing Scheme
B
C A
Supply made in warehouse:
Disregarded supply
Supply made in
warehouse:
Disregarded supply
Declares supply and pays GST
Inputs:Forklift charges, storage charges
Types of warehouses license under Customs Act 1967:Types of warehouses license under Customs Act 1967: Customs warehouse Licensed warehouse Duty free shops Inland clearance depot
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• GST on goods deposited into the warehouse to be suspended
• GST on goods moved from one warehouse to another warehouse to be suspended
• Intermediate supplies within a warehouse to be disregarded
• The last supply is subject to GST (trigger the duty point)
• Goods released to local market to be subjected to GST
• Goods released to overseas market to be zero- rated
• All goods and services consumed in warehouse to be standard-rated
WS - GST Treatment
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WSWS
Example
Daim Sdn Bhd keeps his imported goods in a warehouse approved under section 65 of the Customs Act. One of his customers has agreed to buy certain goods at RM10, 000.00 and the goods are to be taken out from the warehouse. How does his customer determine the value of the last supply? (Prevailing import duty rate = 10% and GST = 6%)
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WSWS
*Value of supply = RM 10,000.00 Rate of import duty = 10% Total duty import payable = RM1000.00 (10%X RM10,000.00) Daim Sdn Bhd’s customer needs to declare the following amount:Value for customs purposes = RM 10,000.00Import duty (10%) = RM 1,000.00Total value for calculating GST = RM 11,000.00
GST Payable (6% x RM11,000) = RM 660.00
*
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Designated Area – Langkawi, Labuan & Tioman
GST Treatment on DA:
* Except for petroleum and other goods as prescribed by the Minister of Finance
Supply GST Treatment
DA to DA:Goods and Services
* Not Subject to GST
Within the DA:Goods and Services
* Not Subject to GST
World to DA:Goods and Services
* Not Subject to GST
DA to World:Goods and Services
Zero rated
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* Except for petroleum and other goods as prescribed by the Minister of Finance
Supply GST Treatment
PCA to DA:Goods
Services Zero rated
Standard rated
DA to PCA:Goods
Services
Standard rated
(as if importation)Standard rated
Designated Area – Langkawi, Labuan & Tioman
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Farming Out Drop shipment Employee benefit Loan on stock and equipment Discount Other transactions
Gifts Samples Warranty Disposal of assets Goods lost/destroyed
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GST TREATMENT ON MANUFACTURING SECTORGST TREATMENT ON MANUFACTURING SECTOR
No transfer of ownership of goods.it is not a supply of goods
Sub-contractor to account for GST on value of services supplied
ABC SDN. 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
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Farming out within 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)
Recipient to account GST on the supply of imported services
ABC SDN. BHD.(GST registered
person)ALLAN PTE LTD
Raw materials valued at RM 100,000
Farmed out
ReturnedFinished goods and charged RM15,000 for labour
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Farming out outside Malaysia
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Overseas
Non-Resident
Local Customer
GST registered Contract
manufacturer (CM Sdn.Bhd)
Non resident makes order for finished goods from CM Sdn. Bhd.
CM Sdn. Bhd. drop-ship finished goods to local customer of non-resident
Malaysia
Non-resident invoices local customer on finished goods received
CM Sdn.Bhd invoices finished goods supplied to the non-resident.
1.
3.
4. 2.
Drop Shipment
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Non-Resident (non-registrant)
Supply made by contract manufacturer to non-resident is subject to GST
goods exported is zero rate
Supply of goods by contract manufacturer (taxable person) to non-resident :
subject to GST at standard rate
GST needs to be charged to the non-resident based on transaction value
Supply of goods (drop-ship) by non-resident to the local customers are not liable to GST
Drop Shipment (Contract Manufacturer)
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Employee benefits include any right, privilege, service or facility provided free of charge to employees as stated in the contract of employment
not subject to GST and input tax is claimable If not stated in the contract of employment all goods provided free to the employees is subject to GST (subject to
gift rule of RM500) except those exempted, blocked input tax and zero rated goods
input tax claimable output tax on gifts > RM500 value to be based on open market value
Services supplied free no GST
Employee Benefits
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Loan stock and equipment
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GST on the value after discount includes : Cash discount Prompt payment discount Volume discount, etc Normally given in percentage or value Given when using discount card/coupon at the time of sale or
after sale Sales to connected person based on open market value and not
on discounted price
Discount
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Gifts and samples
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 GSTSamples
Imported trade sample given relief under GST Relief Order
Trade samples given for promotion not subject to GST on conditions
packed differently and labelled ‘sample’ or ‘not for sale’
samples not packed differently is subject to business gift rules of RM500
Manufacturer’s warranty normally includes: after–sale services and repairs any replacement of spare-parts free of
charge during the warranty period
not subject to GST
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Warranty
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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)
Given free the value will be the open market value subject to GST (>RM500)
Sell as scrap the value will be the sale value of scrap subject to GST
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• Pricing• Consignment Sales• Trade in Goods• Hire purchase• Credit Sales
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Agenda
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RETAILING – PRICING
GST charged on standard rated supplies
Assuming the value of goods or services supplied is RM100.00 and GST chargeable is 6%.
Value : RM 100.00
6% GST charged (output tax) : RM 6.00(RM100.00 X 6%)
Total (price inclusive of 6% GST) : RM 106.00
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RETAILING – PRICING
GST incurred on standard rated supplies
Assuming the price of goods supplied to the registered retailer is RM106.00 inclusive of 6% GST.
Price (inclusive of 6% GST) : RM 106.00
The GST incurred (input tax) : RM6.00(RM106.00 X 6% / 106%).
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Registered retailer sales price:Assuming the GST inclusive price of goods supplied to the registered retailer is RM106.00 and at the point of sale, the registered retailer marks up 20% on the cost of goods.
Price of goods (inclusive of GST) : RM106.006% GST inclusive (Input tax incurred) : (RM 6.00)(RM106.00 X 6%/106%) Actual cost : RM100.0020% Mark-up on Actual cost : RM 20.00(RM20% X RM100.00)Value (cost) at the point of sale : RM120.006% GST Charged : RM 7.20Price at the point of sale : RM127.20
RETAILING – PRICING
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Registered retailer sales price:
Incorrect method
Price of goods (inclusive of GST) : RM106.0020% Mark-up on Actual cost : RM 21.20(RM20% X RM106.00)Value (cost) at the point of sale : RM127.20
6% GST Charged : RM 7.63Price at the point of sale : RM134.83
RETAILING – PRICING
6% Input tax claimed : (RM 6.00) ?
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Non-registered retailer sales price:Assuming the GST inclusive price of goods supplied to the non-registered retailer is RM106.00 and at the point of sale, the registered retailer marks up 20% on the cost of goods.
Price of goods (inclusive of GST) : RM106.00No input tax : (RM 0.00)Actual cost : RM106.00
20% Mark-up on Actual cost : RM 21.20(RM20% X RM106.00)Value (cost) at the point of sale : RM127.20
No GST Charged : RM 0.00Price at the point of sale : RM127.20
RETAILING – PRICING
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Consigned Goods
Goods sent by consignor to a consignee.
the consignee has possession of goods and will attempt to sell them, but the consignee does not own the goods.
RETAILING – CONSIGNMENT GOODS
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Features of consignment are:
•The consignor is entitled to receive all the expenses in connection with consignment.
•The consignee is not responsible for damage of goods during transport or any other procedure.
•Goods are sold at the risk of consignor.
•The profit or loss belongs to consignor only
RETAILING – CONSIGNMENT GOODS
Examples:
Household
accessories Shoes
Clothes
Perfumes
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ShoesFurnitures
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When consignor has to account for GST? Time of Supply (TOS)
when it becomes certain that a supply has taken place, (i.e. goods has been sold by consignee)
Basic TOS : Date of Statement of Sale
Actual TOS : Date of tax invoiceProvided that the tax invoice was issued within 21 days from the basic TOS
GST Treatment on Supplies MadeRETAILING – CONSIGNMENT GOODS
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Company A
Sales Statement
Actual Time Of Supply(Invoice Date)
Sales statement issued by consigneeSales statement issued by consignee
21 days rule21 days rule
Example:
01.05.2015
25.05.2015
Shop B
05.06.201515.06.2015(21 days)
1
2
3
Basic time of supply (Date of Sales Statement)(Date of Sales Statement)
Consignor Consignee
If Tax invoice If Tax invoice issuedissued
Goods removed
25.05.2015
Time Of Supply(If no Tax Invoice
issued within 21 days)
RETAILING – CONSIGNMENT GOODS
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When consignor has to account for GST? Time of Supply (TOS)
12 months after the removal of the goods, Basic TOS : Date after 12 months the
goods were sent
Actual TOS: Date of tax invoiceProvided that the tax invoice was issued within 21 days from the basic TOS
GST Treatment on Supplies MadeRETAILING – CONSIGNMENT GOODS
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Company A
No sales statement issued by consigneeNo sales statement issued by consignee
21 days rule21 days rule
Example:
01.05.2015
01.05.2016
Shop B1
2
3
Basic time of supply (12 months after goods removed)(12 months after goods removed)
Consignor ConsigneeGoods removed
No Sales Statement
Actual Time Of Supply(Invoice Date)
05.05.201621.05.2016(21 days)If Tax invoice If Tax invoice
issuedissued
01.05.2016
Time Of Supply(If no Tax Invoice
issued within 21 days)
RETAILING – CONSIGNMENT GOODS
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Sec 15(4)When a transaction involves trade-in goods, the consideration for the supply is not wholly in money. In such a supply, the consideration of supply is the aggregate of:-
(i) the amount in money as part of the
consideration; and
(ii) the open market value of the trade-in goods as
part of the consideration.
RETAILING – TRADE-IN GOODS
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GCUSTOMERRETAILER
supply : new goods
Consideration : Trade-in goods + cash
$
GT
Scenario 1: Customer is a non-registered person
RETAILING – TRADE-IN GOODS
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Retailer Price (+6% GST) of new sofa : RM1,908.00
Consideration Cash : RM 848.00Trade-in old sofa : RM1,060.00Total Consideration : RM1,908.00
6% GST inclusive : RM 108.00(RM1,908.00 X 6%/106%)
The retailer accounts for output tax amounting to RM108.00.
RETAILING – TRADE-IN GOODS
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GTCUSTOMER(GST registered)
RETAILER(GST registered)
supply : trade-in goods
Consideration : new goods
G
Scenario 2: Customer is a registered person.
Sec 15(3)Where the supply is for a consideration not in money, the value of the supply shall be taken to be an amount, with the addition of the tax chargeable, equal to the open market value of that consideration.
RETAILING – TRADE-IN GOODS
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Supply = of old televisionConsideration = Open market value of consideration
= price (+6% GST) of new television
= RM1,908.00
Consideration for old television : RM1,908.006% GST inclusive : RM 108.00(RM1,908.00 X 6%/106%)
customer has to account for output tax amounting to RM108.00
RETAILING – TRADE-IN GOODS
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Hire Purchase
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RETAILING – HIRE PURCHASETreated as 2 supplies- Supply of goods and supply of credit
payment for goods supplied to buyer
(no GST)
BUYER
SUPPLIERFinancial Institution
Deposit for goods (GST : Standard rated - if a part of payment)
Deferred payment
Supply of goods(GST : Standard rated)
Processing fee(GST : Standard Rated)
Supply of credit (GST : exempt)
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Credit Sales
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RETAILING – CREDIT SALES
A sale in which the full amount will be made in one payment some time in the future or in smallerregular payments over a period of time.
Purchases made by a consumer that do not require a payment made in full at the time of purchase.
Example: Courts, Singer
What is credit Sales?
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RETAILING – CREDIT SALESTreated as 2 supplies- Supply of goods and supply of credit
BUYER
SUPPLIER
Deferred payment
Supply of goods(GST : Standard rated)
Supply of credit (GST : exempt) Processing fee
(GST : Standard Rated)
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RETAILING – GST Implementation Day
Matters to considerprice display
GST inclusive tax invoice to show GST chargeable
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RETAILING – GST Implementation Day
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Replace of price tag
New price tag during GST regime shown is the amount plus GST chargeable.
Amount inclusive of GST= Amount inclusive of GST= RM1060.00RM1060.00
Tax fraction = 6%/106% x RM1060.00 = RM60.00
RM1060.00
Thank Thank YouYou
Thank Thank YouYouGST UnitGST Unit
Royal Malaysian Customs DepartmentRoyal Malaysian Customs Department