Type of Supply and Imported Services
GST affected Supplies
Taxable supplies, exempt supplies, and imported supplies? What are they you may ask. It is a method used to classify the type of supplies that each and every businesses make in the market. It is important to know that each category is different and unique. For example, the common assumption made is that exempt and zero rated supplies are the same. If they are the same, why does the government even explicitly divide the two? They carry similar definition only in general terms. The image below will show you folks a brief summary of the types of supply in this GST model.
What are Taxable Supplies?
A taxable supply is a supply of goods and services other than an exempt supply. A taxable supply consists of standard rated supply and zero rate supply.
Standard rated supply
Supplies which falls in this category will be charged at a 6% rate. This rate is not fixed and it may change in the near future. A good example would be cars, machinery, food as in hotel food or restaurant goods. These will definitely be taxed. Image below will show the basic calculation of GST for standard rated supplies.
It is not that complicated at this stage. These are examples. What actually happens in your business supply chains may and will defer from the above example.
Zero rated supply
Supplies in this category are taxed at 0% throughout the supply chain. Some examples of zero rate supplies would be rice. meat and vegetables. Therefore in this case, the government would have to refund those involved in supplying zero rated goods. Image below will illustrated what I’ve just mentioned.
Based on this table, the mini market would be able to claim input tax on printing supplies of RM 396.
This category of supply is to provide complete relief from GST to the final consumer and also to make our products and services much more competitive abroad. The list below would be some of the goods and services that are in these category:
a.Livestock supplies – Beef, muttons and pork
b.Foodstuff – Rice, sugar, table salt, plain flour, cooking oil
c.Poultry & eggs
d.Fish, prawn, cuttlefish, crabs, oysters, cockles
e.Agricultural products – fruits, fresh vegetables
f.Supply of water – domestic only
g.Exported goods and services
h.Supply of first 300 units of power – domestic only
This is just one section of the whole zero rated order list. Zero rated suppliers are listed under the goods and services tax (zero rated suppliers) Order 20XX which can be found here.
This is the third type of supply. Supplies under this category would not be able to charged GST and also the opportunity to claim input tax would be none. The reason is because it is to reduce the burden on the final consumers. Services such as medical services (government owned only). Below would be a snapshot of the whole exempt supply order:
a.Rail Transport – LRT, Monorail, KTM. MRT
b.Taxi and hire cars
c.Private health and education
d.Buses – Public and school
f.Land for general use (Other than commercial)
g.Public Water Transportation – Ferries and taxis
This table above is to illustrate how does the exempt supply works. It is clearly shown that the hospital cannot claim the input tax of RM5700 and the patients are not charged with GST.
If your supply is caught under this category or if you’re interested in looking for the whole list, it can be found at the Malaysian Customs Website or you could click here which is a direct link to the order file.
Out of Scope Supply
What are out of scope supply? It is a supply that is not under the GST ACT. Therefore, those suppliers in this category cannot be registered under GST. On top of that, the supplier is also not allowed to claim input tax credit on his business input. These are the rules imposed on out of scope supply.
Below would be examples of such supplies:
- Non business supply;
- E.g Buying a bottle of wine for personal consumption
- Supply of goods made outside Malaysia;
- E.g Car parts made in Thailand
- Supply of services made by a person who does not belong in Malaysia other than the supply of imported services
- Business below threshold;
- The threshold of rm500k turnover
- Government supply except selected prescribed services;
- Supply by statutory bodies and local authorities with respect to regulatory and enforcement functions; and
- Supply of goods or services made within or between designated areas (Labuan, Langkawi and Tioman) except selected prescribed goods or services.
This is article is to show what how are various type of supplies is taken into account by the GST Model. If you readers felt this article is informative and helpful, please do not hesitate to share it but if you think we left out certain information which you think will add value to this article and other readers, drop us an email at firstname.lastname@example.org or email@example.com or leave a comment below!