25 May, 2018
1. The Goods and Services Tax (Rate of Tax) (Amendment) Order 2018 (“Order”) was gazetted on 16 May 2018 and takes effect from 1 June 2018. Under the Order, all taxable supplies of goods and services which are made in Malaysia and all importation of goods into Malaysia, would be zero-rated.
2. On 16 May 2018, the Malaysian Ministry of Finance also issued a press release stating that supplies of goods and services made in Malaysia, as well as, goods and services imported into Malaysia, which are currently standard-rated (i.e. subject to 6% GST) would be zero-rated with effect from 1 June 2018 until further notice. This would not affect “exempt supplies”, which would remain as exempt supplies for the purposes of the Goods and Services Tax Act 2014 (“GST Act”).
3. The key provisions pertaining to supplies spanning a change in GST rate (“Supply Spanning a Change in Rate”) are encapsulated in sections 66 and 67 of the GST Act. If the supply in question is a Supply Spanning a Change in Rate, the following will apply:
a. the old rate (6% GST) shall be charged on the higher of the full/part payment received before 1 June 2018 or the value of the supply of goods (where they are wholly or partly removed or made available before 1 June 2018) or services (where they are wholly or partly performed before 1 June 2018); and
b. no GST shall be charged on the difference, if any, between the amount of the entire supply and the amount referred to in subparagraph (a) above.
4. Accordingly, any services rendered (whether in whole or in part) before 1 June 2018 are still subject to 6% GST. Similarly, any goods supplied before 1 June 2018 are still subject to 6% GST.
5. “A Supply Spanning a Change in Rate” is defined in section 66(5) of the GST Act (set out below) and this refers to any supply where:
a. full payment is received before 1 June 2018 and the goods are wholly removed or made available or the services are wholly performed after 1 June 2018;
b. full payment is received after 1 June 2018 and the goods are wholly removed or made available or the services are wholly performed before 1 June 2018;
c. full payment is received before 1 June 2018 and the goods are partly removed or made available or the services are partly performed before and after 1 June 2018;
d. full payment is received after 1 June 2018 and the goods are partly removed or made available or the services are partly performed before and after 1 June 2018;
e. the goods are wholly removed or made available or the services are wholly performed before 1 June 2018 and part payment is received before and after 1 June 2018;
f. the goods are wholly removed or made available or the services are wholly performed after 1 June 2018 and part payment is received before and after 1 June 2018;
g. part payment is received before 1 June 2018 and part payment is received after 1 June 2018;
h. part payment is received before 1 June 2018 and the goods are partly removed or made available or the services are partly performed after 1 June 2018;
i. the goods are partly removed or made available or the services are partly performed before 1 June 2018 and part payment is received after 1 June 2018; or
j. the goods are partly removed or made available or the services are partly performed before 1 June 2018 and the goods are partly removed or made available or the services are partly performed after 1 June 2018.
For further information, please contact:
Abhilaash Subramaniam, Shearn Delamore & Co
abhi@shearndelamore.com
