Closing the twelve month loop

March 2016

by Jasrene Padman

Have you considered the following?

We are now approaching the 12 month mark from the GST implementation date (1 April 2015). GST is generally assessed according to your taxable period but there are certain matters that require attention on an annual basis. Below we outline some key considerations for businesses one year from GST implementation. 

1. Claiming of input tax credit on utility expenses

A concession was provided by the Royal Malaysian Customs (“RMCD”) through Director General’s ("DG") Decision 7/2015 back in July 2015 which allows GST registered persons (tenants) to claim input tax credit on electricity and water tax invoices that are not in their name but in the name of the property owner.

The concession was given only up to 31 March 2016. Businesses have up to the taxable period ending 31 March 2016 to include the input tax claims in relation to utility expenses that are not in the name of the business but subject to the prescribed conditions as set out in the said DG’s Decision. Affected businesses should take the necessary steps to ensure that the name on the tax invoice is changed by the April 2016 taxable period to continue claiming input tax credit.  

2. Renewal of self-billed invoice application

GST registered persons are allowed to issue self-billed invoices for a period no later than the expiry of 12 months from the approval of self-billing application or the expiry of the contract period in the self-billing agreement between the supplier and the recipient. 

As such, for GST registered persons that issue self-billed invoices, you should review the contract period of your self-billing agreement and determine whether a renewal of self-billing invoice application must be made.

Do note that self-billing invoice applications can now be made by submitting a self-billed invoice declaration to the respective RMCD control station.  

3. Persons under voluntary GST registration

A person who has voluntarily registered for GST would have been granted approval based on the satisfaction of the DG that the person is making or intending to make taxable supplies.  

We understand that for voluntary GST registrations, RMCD grants approval to persons who intend to make taxable supplies within one year from registration. Therefore, we would caution that the DG has the power to cancel registrations if the registered persons have not made any taxable supplies by the intended date as indicated in the GST application for registration.

4. Longer period adjustment (also known as annual adjustment)

Businesses that are mixed suppliers are required to perform longer period adjustments for residual input tax claimed provisionally at the end of every tax year. This adjustment which should be accounted for in the second taxable period following the end of a tax year is essential to ensure that input tax was fairly apportioned. 

Generally the first tax year would be from 1 April 2015 up to 31 March 2016 (12 months). Mixed suppliers are allowed to correspond the tax year with their businesses’ financial year with the approval of the DG. 

While the RMCD’s GST Guide on Partial Exemption (dated 6 November 2015) states that the RMCD allows for a registered person’s tax year to correspond with his financial year, there is lack of clarify as to whether this can be regarded as a “blanket approval” to amend the standard tax year. 

In any event, mixed suppliers should be prepared to perform your first annual adjustment which is around the corner.

Jasrene Padman is a Senior Associate Consultant, Indirect Tax Advisory Group at PwC Malaysia.