What is GST

The Malaysian GST regime: same same, but different

To modernise its taxation system and improve business efficiency, Malaysia replaced its Sales and Service Tax regimes with the Goods and Services Tax (GST) effective 1 April 2015. 

The Malaysian GST system has two rates of GST (6% and 0%), and provides for the zero-rating of exported goods, international services, basic food items, and many books.

The following supplies are generally GST exempt:

• residential property
• financial services
• childcare and private education services
• healthcare services
• public transport services

But while the Malaysian GST regime has similarities to the Singaporean GST regime and draws input from the Australian, UK, New Zealand and South African GST/VAT rules, there are a number of unique schemes and “quirks” which multinational businesses operating in Malaysia should take note of, including the following:

• Designated Areas, where supplies made within these areas will be disregarded for GST purposes
• Approved Toll Manufacturer Scheme, where certain manufacturers can qualify to have import GST suspended
• Reverse charge mechanism extends to also apply to fully taxable persons, and non-registered parties who consume imported services for business use
• Warehousing Scheme: there are specific rules which allow for the supply and transfer of goods between licensed warehouses to not be subject to GST
• Deemed Input Tax Credit (DITC) scheme: the supply of non-life insurance is taxable in Malaysia; however the rules allow providers of non-life insurance with a deemed input tax credit with respect to claim settlements
• Mandatory issuance of tax invoices with respect to standard-rated supplies