Introduction to GST- Part 1

The Goods and Services Tax Act 2009 was introduced in Parliament in December 2009 and this time, the government looks certain in implementing GST by mid-2011. This will give businesses in Malaysia about eighteen (18) months to prepare and get ready for GST implementation in 2011.

Like it or not, is your business ready for GST implementation?.

This series ‘Introduction to GST’ is based on my interpretation of the GST Act 2009 and my understanding of the operations of the relevant tax authorities, but like all interpretations, the final interpretation lies with the respective tax authorities.

In this series, we will look into areas such as

  • Overview of GST
  • What is GST?
  • GST Basics
  • Who needs to register?
  • How GST works?
  • Accounting for GST
  • Other related issues
  • Transitional period
  • Is your business ready for GST?

  • Overview of GST

Welcome to the world of GST.

It is important to become familiar with the key GST concepts and correct GST terms. Understanding these terms and concepts is the easiest way to start implementing GST in your business.

GST impacts many facets of a business and incorrect handling of GST can cause financial loss. Your employees need to be educated and trained in the workings and operations of GST.

I won’t argue about the merits and demerits of the GST regime and will leave it to the politicians, analysts and economists to debate on it. My emphasis will be the impact of GST on your business operations and accounting for GST.

First and foremost:-

  • What is the Goods and Services Tax (GST)?

GST is a tax charged on the taxable supply of goods and services made by a taxable person or entity in the course or furtherance of business in Malaysia. GST is a domestic consumption tax.

“Taxable supply” means a supply of goods or services, other than an exempt supply but includes a zero-rated supply.

“Supply” means all forms of supply, including supply of imported services, done for a consideration and anything which is not a supply of goods but is done for a consideration is a supply of services.

“Goods” is defined in the GST Act 2009 as any kind of movable and immovable property but excludes money except

  • a bank note or coin before it becomes legal tender in Malaysia or in any country; or
  • a collector’s piece, investment article or item of numismatic interest.

“Services” is defined as anything done or to be done including the granting, assignment or surrender of any right or the making available of any facility or advantage but excludes supply of goods or money.

“Imported services” means any services by a supplier who belongs in a country other than Malaysia or who carries on business outside Malaysia, to a recipient who belongs in Malaysia, and the services are consumed in Malaysia.

“Consideration” in relation to the supply of goods or services to any person, includes any payment made or to be made, whether in money or otherwise, or any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the person or by any other person.

As you will notice the definition of “supply of goods and services” is broadly defined to cover almost everything. GST is a very broad tax and thus affect nearly every goods and services.

Remember: GST is a tax on domestic consumption of goods and services.

The next article will touch on GST Basics.

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