Introduction to GST – Part 8

  • Accounting for GST (continued)

Manufacturer’s Warranty

It is quite normally for the selling price of goods to include:

  • A charge for after-sale service and repairs
  • Any replacement of spare parts without charge (FOC) during the warranty period

Services and replacement of parts which are not charged (that is FOC, Free of charge) are not subject to GST.

Approved Schemes

Below are some of the approved schemes for GST:

  • Approved Trader Scheme
  • Approved Toll Manufacturer Scheme
  • Approved Jeweler Scheme

Approved Trader Scheme

Generally all goods imported by manufacturers are subject to GST. Under an Approved Trader Scheme (ATS):

  • An ATS participant is allowed to defer GST on the importation of goods.
  • GST due on all goods imported in a particular month would be accounted for in the following month.
  • GST due will be offset against the related input tax credits in the same GST return.
  • GST due and input tax claims is just an accounting entry that nets off to zero.

The following persons or businesses are eligible to apply for ATS:

  • Companies located within FTZ and LMW
  • IPC / RDC
  • Contract manufacturers under ATMS
  • Jewelry manufacturers under AJS
  • Companies with turnovers above RM20 million and with at least 80% of the supplies made are zero-rated

The approval for participant under ATS is subjected to the following criteria:

  • Participants must make wholly taxable supply
  • Goods imported in the furtherance of a business
  • Participants must submit monthly GST return
  • Participants must have good accounting system

Approved Toll Manufacturer Scheme


  1. Toll manufacturer (TM) imports consigned goods from the overseas principal.
  2. TM drop ships the finished goods to the local customer of the overseas principal.
  3. The overseas principal invoices the local customer on the finished goods received from TM.
  4. TM invoices the overseas principal for the value-added activities.

The supply of value added activities made by the toll manufacturer (TM) for the overseas principal (that is processing charges / toll) is to be disregarded. The delivery of the processed goods (finished goods) by the TM (for his overseas principal)  to a local customer (GST registrant or non-GST registrant) will be accounted by way of “Recipient Accounting”:

  • If local customer is a GST registrant – normal GST return
  • if local customer is a non-GST registrant – a special form is required

Local supplies made to the TM under the account of the overseas principal will be treated as zero-rated supplies.

The following persons are eligible to apply for Approved Toll Manufacturer Scheme (ATMS):

  • Any TM who has contract(s) with overseas principal(s) to carry out value added activities worth RM2 million or more (excluding the cost of raw materials supplied or belonging to the overseas principal) per annum
  • 80% of the processed goods must be exported

The following are the conditions required to apply for ATMS:

  • The TM must perform value added activities that are related to manufacturing, treatment processing, finishing, assembling and other manufacturing-related works on the consigned goods
  • The transactions must involve value added activities on goods consigned from overseas

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