Tax Practice e-Law Alert - Issue 1, April 2015

1. Introduction

   Goods and Services Tax (GST) is a multi-stage tax on domestic consumption which is charged on all taxable supplies of goods and services in Malaysia and on importation of goods and services into Malaysia, except those specifically exempted under the Goods and Services Tax Act 2014 [Act 762] ("the Act").

   A person who is registered under the Act is required to charge GST on his supply of goods and services. He is also allowed to claim input tax credit for GST incurred on the purchase or acquisition of goods and services for the purpose of making a taxable supply in the course or furtherance of his business. In the event where the output tax charged exceeds the input tax incurred, the registered person is required to account for the difference to the Royal Malaysian Customs Department ("RMCD").

   In this alert, we seek to provide our readers with an insight into understanding the liability of a taxable person to account for GST, specifically in the context where goods and services are sold by an agent and where property is sold to recover debt owed by a taxable person. To this end, it is instructive to first have a general understanding of when GST is chargeable.

2. Circumstances in Which Goods and Services Tax is Chargeable

   Section 9 of the Act is the overarching GST charging provision in Malaysia. Specifically, Subsection 9(1) states that:

   A tax to be known as goods and services tax, shall be charged and levied on —

   any supply of goods or services made in Malaysia, including anything treated as a supply under this Act; and any importation of goods into Malaysia. Subsection 9(2) further provides that:

   Except as otherwise provided in subsections 13(3) and 72(5), tax shall be charged on any supply of goods or services made in Malaysia where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.

   A perusal of the above provisions shows that in order to charge GST, the following four circumstances have to be present:

   There is a taxable supply; The taxable supply is made by a taxable person; The taxable supply is made in Malaysia; and The taxable person makes the taxable supply in the course or furtherance of his business "Taxable supply" is defined to mean a supply of goods and services which are standard-rated supply and zero-rated supply and does not include an exempt supply.

   "Taxable person" means any person who is or is liable to be registered under the Act.

3. General Liability to Account for GST

   Subject to the above and in the event where GST is chargeable, the liability of a taxable person to account for GST is governed by subsection 9(3) of the Act in the...