All Exports Zero-rated Under GST Regime

By Azizul Hj Ahmad

KUALA LUMPUR, July 16 (Bernama) -- To make the export sector in Malaysia more competitive, the government has to zero-rate all supplies of goods and international services exported from Malaysia under the Goods and Services Tax (GST) to be implemented next year.

The zero-rated supplies mean that no GST would be collected as businesses are eligible to claim input tax credit in acquiring supplies, according to the GST industry guide on manufacturing by the Royal Malaysian Customs Department.

With this benefit, the prices of Malaysian exports would become more competitive on the global stage as no GST is imposed on exported goods and services while GST incurred on inputs can be recovered along the supply chain.

In the long run, Malaysia's export industry will strengthen which in the process will help the country's economy to progress even further.

Based on the guide, exporters do not charge GST on their exports but are able to claim input tax credits on GST incurred in their inputs in the cost of business.

However, the guide says that the exporters should keep documentary evidence as proof of exports such as the export declaration forms, invoices and packing list.

At the National GST Conference 2014 here last week, the Royal Malaysian Customs Department's Assistant Director from the GST Division, Annie Thomas, said manufacturers who were export-oriented were eligible for special schemes such as "approved trader scheme".

Under the scheme, she said, the manufacturers could suspend GST payment on imported goods, thus alleviating their cash flow problem on importation.

Other special schemes that were introduced to alleviate negative cash flow impact to business include facilities called the "approved toll manufacturer scheme" (ATMS) and the "warehousing scheme" (WS).

Toll manufacturing is an arrangement in which a company which has a specialised equipment processes raw materials or semifinished goods for another company.

ATMS scheme is provided to disregard any supply made by the local toll manufacturers to the overseas clients while WS scheme is provided to disregard supplies within a warehouse before the duty point and the last supply is subject to GST.

Annie was one of the speakers at a session entitled, "Impact of GST on manufacturing and related industries", at the conference organised by the Malaysian National News Agency (Bernama) and Tax Advisory & Management Services Sdn Bhd.

She said the "output tax" referred to the GST charged to customers, while those incurred by the manufacturer on business purchases and overheads is termed "input tax".

Output tax will be offset by input tax and if output tax is more than input tax, the net tax is payable to the Customs Department.

However, if input tax credit exceeds output tax payable, the Customs Department will refund the surplus input tax credit to the manufacturers.

Annie also said a manufacturer was not entitled to zero rate for the supplies made to his overseas buyers, if the goods were not exported from from Malaysia but delivered locally.

This could happen in the case of goods exported under the name of logistics company or to be drop-shipped to the local customers of overseas buyers hence the supplies will be subjected to GST at standard-rated.

Another speaker at the same session, the Federation of Malaysian Manufacturers (FMM) Vice-President, Raja Datuk Abd Aziz Raja Muda Musa, said there was low awareness on the facilities offered by the government for the manufacturers.

"Association such as ours (FMM) and other trade associations must play a part to disseminate the information, otherwise many might missed it," he said, adding that with the facilities, more manufacturers would consider exporting.

"I am sure the number would go up," he said.


We provide (subscription-based) 
news coverage in our
Newswire service.