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GST TREATMENT ON MANUFACTURING AND RETAIL SECTOR Venue : KLSFEA Shah Alam PowerPoint PPT Presentation


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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).

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GST TREATMENT ON MANUFACTURING AND RETAIL SECTOR Venue : KLSFEA Shah Alam

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Gst treatment on manufacturing and retail sector venue klsfea shah alam

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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

FIZ & LMW Concept


Gst treatment on manufacturing and retail sector venue klsfea shah alam

FIZ & LMW Concept


Gst treatment on manufacturing and retail sector venue klsfea shah alam

1

Facilities under GST


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Approved Trader Scheme (ATS)

  • 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 GSTreturn 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”

5


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Approved Trader Scheme

Malaysia

AA Pte Ltd

ATS approval

XX Sdn Bhd

Port (November 20XX)

Value of imported

Goods (CIF + Duty

Import )= RM106000

GST 6%= RM6000

Total value of goods imported under ATS

= RM106,000

Total value of GST suspended= RM6000

GST-03 (November 20XX)

overseas

Customs no.1

Goods cannot be suspended under ATS

  • Liquor, beer, wine and spirits

  • Tobacco and tobacco products

  • Blocked input tax goods

  • Goods for personal/non- business

GST is suspended


Gst treatment on manufacturing and retail sector venue klsfea shah alam

ATS

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

7


Gst treatment on manufacturing and retail sector venue klsfea shah alam

LMW COMPANIES

SEC.65/65A CUSTOMS ACT 1967 –IMPORT/EXPORT/LOCAL SALES PROCEDURES

INPUT

- Raw materials / components

- Machines / equipments

OUTPUT

EXPORT

DA

FCZ (outright export)

IMPORT

  • Zero Rated

  • EXEMPTION;

  • Import Duty

  • Excise Duty

  • GST on importations (6%)

    • suspended under

    • ATS

LMW Company

GPB / FIZ /FCZ

  • Subject to GST

  • Standard rate

GST REGISTRANT /

ATS

Local Supplier

FIZ

LMW

Others

LOCAL SALES

  • Subject to GST;

  • Standard rate

GST incurred for making taxable supplies

-Claimable

Subject to

- Import duty

- GST at standard rate


Gst treatment on manufacturing and retail sector venue klsfea shah alam

ATS

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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Approved Toll Manufacturer Scheme

  • 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 atms

Approved Toll Manufacturer Scheme (ATMS)

Recipient accounting

TM invoices overseas principal for value-added services

-disregarded

Overseas principal invoices local customer on finished goods received

4.

3.

TM imports consigned goods from the overseas principal (ATS)

1.

Malaysia

TM drop-ships finished goods to local customer of overseas principal

Local supplier deliver goods on behalf of OP (ZR)

2.


Gst treatment on manufacturing and retail sector venue klsfea shah alam

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;

    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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

ATMS

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?

  • 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

OUTPUT TAX = RM12,000

INPUT TAX = RM12,000

GST Return - May 2015(GST-03)

*GST No.4 - May 2015

Value of supply RM200,000.00

GST amount payable RM12,000.00

*Return for non-registrant


Gst treatment on manufacturing and retail sector venue klsfea shah alam

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

Warehousing Scheme

  • Types of warehouses license under Customs Act 1967:

  • Customs warehouse

  • Licensed warehouse

  • Duty free shops

  • Inland clearance depot

Inputs:

Forklift charges,

storage charges

C

Declares supply

and pays GST

A

Supply made in

warehouse:

Disregarded supply

Supply made in

warehouse:

Disregarded supply

B


Gst treatment on manufacturing and retail sector venue klsfea shah alam

WS - GST Treatment

  • 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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

WS

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%)


Gst treatment on manufacturing and retail sector venue klsfea shah alam

WS

*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 10,000.00

Import duty (10%)= RM 1,000.00

Total value for calculating GST= RM 11,000.00

GST Payable (6% x RM11,000) = RM 660.00

*


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Designated Area – Langkawi, Labuan & Tioman

GST Treatment on DA:

* Except for petroleum and other goods as prescribed by the Minister of Finance


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Designated Area – Langkawi, Labuan & Tioman

* Except for petroleum and other goods as prescribed by the Minister of Finance


Gst treatment on manufacturing and retail sector venue klsfea shah alam

GST TREATMENT ON MANUFACTURING SECTOR

  • Farming Out

  • Drop shipment

  • Employee benefit

  • Loan on stock and equipment

  • Discount

  • Other transactions

    • Gifts

    • Samples

    • Warranty

    • Disposal of assets

    • Goods lost/destroyed

22


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Farming out within Malaysia

  • No transfer of ownership of goods.

    • it is not a supply of goods

  • Sub-contractor to account for GST on value of services supplied

Finished goods and charged RM15,000 for labour

Returned

XYZ SDN. BHD.

(GST registered person)

ABC SDN. BHD.

(GST registered person)

Farmed out

Raw materials valued at RM 100,000

23


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Farming out outside 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

Returned

Finished goods and charged RM15,000 for labour

ALLAN PTE LTD

ABC SDN. BHD.

(GST registered person)

Farmed out

Raw materials valued at RM 100,000

24


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Drop Shipment

Non-resident invoices local customer on finished goods received

CM Sdn.Bhd invoices finished goods supplied to the non-resident.

4.

Non resident makes order for finished goods from CM Sdn. Bhd.

2.

1.

Malaysia

CM Sdn. Bhd. drop-ship finished goods to local customer of non-resident

3.


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Drop Shipment (Contract Manufacturer)

  • 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


Gst treatment on manufacturing and retail sector venue klsfea shah alam

Employee Benefits

  • 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

  • 27


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Loan stock and equipment

    • Raw materials on loan

      • it is a supply of goods

        • subject to GST

  • Equipments on loan

    • it is treated as a supply of services

      • subject to GST

  • 28


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Discount

    • 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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    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 GST

    • Samples

      • 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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Warranty

    • 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

  • 31


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    2

    RETAILING


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Agenda

    • Pricing

    • Consignment Sales

    • Trade in Goods

    • Hire purchase

    • Credit Sales


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    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%).


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – PRICING

    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) : RM106.00

    6% GST inclusive (Input tax incurred): (RM 6.00)

    (RM106.00 X 6%/106%)

    Actual cost: RM100.00

    20% Mark-up on Actual cost: RM 20.00

    (RM20% X RM100.00)

    Value (cost) at the point of sale: RM120.00

    6% GST Charged: RM 7.20

    Price at the point of sale: RM127.20


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – PRICING

    Registered retailer sales price:

    Incorrect method

    Price of goods (inclusive of GST) : RM106.00

    20% 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 7.63

    Price at the point of sale:RM134.83

    6% Input tax claimed: (RM 6.00) ?


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – PRICING

    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) : RM106.00

    No 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 0.00

    Price at the point of sale: RM127.20


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    • 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.


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    • 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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Examples:

    Household

    accessories

    Shoes

    Perfumes

    Clothes

    Furnitures

    Shoes


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    GST Treatment on Supplies Made

    • 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 invoice

      • Provided that the tax invoice was issued within 21 days from the basic TOS


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    Sales statement issued by consignee

    Example:

    1

    Shop B

    Company A

    01.05.2015

    Goods removed

    Consignee

    Consignor

    2

    25.05.2015

    Sales Statement

    Basic time of supply (Date of Sales Statement)

    21 days rule

    3

    05.06.2015

    15.06.2015

    (21 days)

    25.05.2015

    If Tax invoice issued

    Time Of Supply

    (If no Tax Invoice issued within 21 days)

    Actual Time Of Supply

    (Invoice Date)


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    GST Treatment on Supplies Made

    • 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 invoice

      • Provided that the tax invoice was issued within 21 days from the basic TOS


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CONSIGNMENT GOODS

    Example:

    No sales statement issued by consignee

    1

    Shop B

    Company A

    01.05.2015

    Goods removed

    Consignee

    Consignor

    2

    01.05.2016

    No Sales Statement

    Basic time of supply (12 months after goods removed)

    21 days rule

    3

    05.05.2016

    21.05.2016

    (21 days)

    01.05.2016

    If Tax invoice issued

    Time Of Supply

    (If no Tax Invoice issued within 21 days)

    Actual Time Of Supply

    (Invoice Date)


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – TRADE-IN GOODS

    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:-

    the amount in money as part of the consideration; and

    the open market value of the trade-in goods as part of the consideration.


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – TRADE-IN GOODS

    Scenario 1: Customer is a non-registered person


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – TRADE-IN GOODS

    Retailer

    Price (+6% GST) of new sofa : RM1,908.00

    Consideration

    Cash: RM 848.00

    Trade-in old sofa: RM1,060.00

    Total 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.


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – TRADE-IN GOODS

    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.


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – TRADE-IN GOODS

    Supply = of old television

    Consideration = Open market value of consideration

    = price (+6% GST) of new television = RM1,908.00

    Consideration for old television: RM1,908.00

    6% GST inclusive : RM 108.00

    (RM1,908.00 X 6%/106%)

    customer has to account for output tax amounting to RM108.00


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Hire Purchase


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – HIRE PURCHASE

    Treated as 2 supplies

    - Supply of goods and supply of credit


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Credit Sales


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CREDIT SALES

    What is credit Sales?

    • A sale in which the full amount will be made in

    • one payment some time in the future or in smaller

    • regular 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


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING – CREDIT SALES

    Treated as 2 supplies

    - Supply of goods and supply of credit


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING –

    GST Implementation Day

    • Matters to consider

    • price display

      • GST inclusive

    • tax invoice to show GST chargeable


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    RETAILING –

    GST Implementation Day

    Replace of price tag

    RM1060.00

    • New price tag during GST regime shown is the amount plus GST chargeable.

    • Amount inclusive of GST= RM1060.00

    • Tax fraction = 6%/106% x RM1060.00 = RM60.00

    58


    Gst treatment on manufacturing and retail sector venue klsfea shah alam

    Thank You

    GST Unit

    Royal Malaysian Customs Department


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