Registration of Businesses
The big question here is Who Is Liable To Register for GST? Many will ask as this may affect their businesses in a holistic manner. They have to register when they are making taxable supply for business purposes and the GST exclusive value of that supply exceeds the threshold of 500,000 for a period of 12 months or less. It is important to keep this statement in mind because it is the fundamental to why you have to register.
A few things I would highlight here. The first one would be taxable supply. What is a taxable supply? In case you haven’t read my previous post, you will need it as you read further. A taxable supply is a supply made with consideration and also without consideration. Taxable supply can be divided in 4 types;
- Standard Rated Supply
- Zero Rated Supply
- Deemed Supply
- Business gift exceeding RM500
- Disposal of Business Assets
- Supply of services to connected persons
- Business assets held on the last day of registration
- Disregarded Supply.
- Supplies between members of the same group
- Supplies of goods under Warehousing Scheme
- Supplies between venture operator & venturers
- Supplies of goods to his oversea principal
The second key pointer would be to know which category you fall in. Your businesses can be classified as a company, company with divisions or even sole proprietorship. It is important to know your type of businesses as each category of person differs. If you’re in a partnership, your taxable turnover would be base on how much you make through the partnership. If you own a company, it will be based on all the taxable supplies made by the company. There are about 7 category of person as far as the Malaysian GST Mechanism is concerned. The table below would describe in detail for each category of person.
Upon knowing what are taxable supply and what category one falls in, it is also crucial to know how does the twelve month period works. There are two methods in measuring the twelve month period which are historical method or future method.
The historical method is based on the value of taxable supplies in any month plus the value of the taxable supplies for the eleven months immediately before that month. The image below would depict the situation mentioned.
Let’s take an example. Assuming you’re operating a mini market (most stuff are taxable supplies) and you want to determine whether by this month you hit the half a million figure, the formula would be to add up the total amount of taxable supplies made by you through adding up 11 months backward from the month you’re in right now and also the current month you’re in. The total in RM would determine whether you hit the turnover figure. Hence, this is the historical method.
The future method is based on the value of the taxable supplies in any month plus the expected value of the taxable supplies for the eleventh months immediately after that month. This method is the direct opposite of the historical method. A simple example would be; you receive a contract in August to supply goods worth of RM 1,000,000 for the next two years. This automatically tells you that your business have hit the taxable turnover and you must register for GST. The image below would show how this method works.
Liable period to notify
Keep in mind that upon hitting the half a million turnover figure, you are liable to register under the act. The custom have decided that there are a window period for you to notify them. Everyone that is liable to register for GST has 28 days to notify the custom. When do you notify? One needs to notify the DG within the 28 days from the end of the month when the threshold of RM 500,000 is exceeded (historical method) or expect to exceed (future method). This event is shown in the image below.