YYC - Goods and Services Tax (GST)
Malaysia for Manufacturing Sector

A manufacturer in Malaysia who is registered as a "registered person" is required to charge goods and services tax (GST) on taxable supplies that are standard-rated when the goods are sold to the customers.

Almost all supplies in manufacturing sector are subject to GST. Examples of such taxable supplies are:-

    i.Sales of finished goods and stocks;
    ii.Disposal of capital assets;
    iii.Maintenance services rendered

Manufacturers in Malaysia who make taxable supplies and have annual turnover which exceeds RM500,000.00 are liable to be a "registered person".

1. Inputs tax for manufacturers in Malaysia

Basically, all GST incurred by a manufacturer in Malaysia for his business purposes can be treated as his input tax. This input tax can be offset against any output tax received from customers.

However, the input tax which incurred by a manufacturer in Malaysia for exempt supplies are not allowed to be offset against output tax and refund claimed.

Inputs acquired by a manufacturer can be categorized as follows:-

  • Capital assets
    • capitalized for accounting purposes
      • Land and buildings (eg. office and factory)
      • Plant and machineries
      • Tools and equipments

  • Raw materials and components
      • that are directly used for manufacturing of finished goods.

  • Services, utilities and other charges
      • such as rental of premises, water and electricity charges.

2. GST Treatment for Importation of Goods

Manufacturers who imports goods into Malaysia must be aware that all imported goods into Malaysia are subject to GST.

Malaysia GST is computed based on transaction value including insurance and freight, all duties payables and other incidental charges.

For example:
Transaction value               :     RM50,000.00

Insurance and freight          :    RM  5,000.00

Import duty                            :    RM  5,500.00          (Assuming Import Duty 10%)

                                                  ________________ 

Value of Import                     :    RM60,500.00

Import GST payable = RM60,500.00 x 6%=RM 3,630.00

GST in Malaysia on imported goods needs to be declared in a specific customs declaration form and the tax must be paid at the point of entry. GST is generally payable before the goods are released from customs control. However, a registered manufacturer is able to recover the GST paid on imports by crediting the amount allowable against the output tax chargeable on the taxable supplies.

3. Outputs tax for manufacturers in Malaysia

Generally, all taxable supplies should accounted output tax except for zero-rated supplies. A manufacturer is liable to collect GST on taxable supplies from his local customers. Output tax collected from customers should be pay to custom after offset against input tax.

For example:
Selling Price                      :     RM100,000.00    (Local sales)

Output tax (6%)                  :     RM    6,000.00
                                           _______________

Net Selling Price               :     RM106,000.00

Output tax collected from customer = RM 6,000.00

Input tax paid to suppliers                 = RM 3,630.00

GST paid to custom = RM6,000.00 - RM3,630.00

                                    = RM2,370.00

4. GST treatment of exports

In order to encourage export sector in Malaysia to be more competitive, all exports are treated as zero-rated supplies, which means that no output tax will be collected from overseas customers. Therefore, most manufacturers who are export-oriented would most likely have positive input tax refund.

For example:
Selling Price                  :     RM100,000.00         (Exported)

Output tax (0%)             :     NIL

                                           _______________

Net Selling Price          :     RM100,000.00

Output tax collect from customer = NIL
Input tax paid to suppliers = RM 3,630.00

GST refund from custom = RM3,630.00

Farming In / Out (Sub-contractor work)

In certain manufacturing activities, it may be common practice for the principal manufacturer to outsource certain work to the sub-contractors for further processing. For GST treatment this is not a taxable supply for the principal as there was no transference of ownership of goods from the principal manufacturer to sub-contractor. Therefore, GST is no applicable in this matter.

However, the sub-contractor would be charged GST output tax on the value of service supplied to principal.

For example:

Malaysia gst graph

If you require for any further information regarding GST, please do not hesitate to contact our GST consultants at 03 - 2142 6689. We are pleased to help you in any difficulty regarding to GST.

Our address and contact info:

17 & 19, Jalan Brunei Barat,
Pudu, 55100 Kuala Lumpur.

Tel: +603-2142 6689 / +6019-368 6868
Fax: +603-2141 0957/+603-2141 7468

Email: contact@yycadvisors.com