Explanation of the tax codes

This refers to goods and/or services purchased from GST registered suppliers. The prevailing GST rate is 6% with effect from 01/04/2015. As it is a tax on final consumption, a GST registered trader will be able to claim credits for GST paid on goods or services supplied to them for the furtherance of businesses. The recoverable credits are called input tax. Examples include goods or services purchased for business purposes from GST registered traders, imported services etc.

This tax code refers to purchases with GST incurred at 6% for all capital goods acquired that is claimable regardless the value of the goods. For example, this includes land and buildings, equipment, machinery, vehicles, or other capital goods which the company claims for input tax, and capitalizes the acquired capital goods as their assets. The GST registrant claiming the capital goods has to declare the value of these claimed capital goods under field (6a &6b) and field (16) of the GST-03 return.

This is only applicable to GST registered traders that make both taxable and exempt supplies (commonly known as partially exempt traders). TX-ES should be used for transactions involving the payment of input tax that is directly attributable to making non-Incidental Exempt Supplies. TX-ES is only included in the GST-03 (field 6a & 6b) return once the de minimis rule is fulfilled. An example for this tax code is where your company bought wall paper for your residential apartment rented to others, and the purchase costs already include 6% GST. However, you are not eligible to claim the amount of input tax as it would be applied directly to make an exempt supply (rental of the residential apartment). Please refer to APPENDIX 5 for more details on the de minimis rule. (Note: Replace TX-N43)

This refers to transactions involving the payment of input tax attributable to the incidental exempt financial supplies as input tax attributable to taxable supplies. This means that the registered person is entitled to claim any input tax that is attributable to the making of the following incidental exempt financial supplies. Examples of usage for this tax code are purchasing a security box for the accounts clerk to deposit daily earnings of the company in a bank, hiring a security firm to transfer/deposit money into financial institutions (bank), selling lots of shares through a remisier, with GST charged on the commission, and incurred GST on legal agreements and other expenses related to a financial loans. (Note: Replace TX-E43)

This is only applicable to GST registered traders that make both taxable and exempt supplies (commonly known as partially exempt traders/mixed suppliers). This refers to GST incurred that is not directly attributable to the making of taxable or exempt supplies (commonly known as residual input tax). However, a mixed supplier can claim the full amount of the residual input tax incurred if the amount of exempt supply fulfilled the de minimis rule. Otherwise, he is required to apportion the residual input tax incurred accordingly. An example is a residual input tax on the operational overheads for a development of mixed property (properties that include residential and commercial). Please refer to APPENDIX 5 for more details on partial exemption.

This refers to all goods imported into Malaysia that are subject to GST. The GST amount is calculated on the value, which includes the cost, insurance and freight plus any customs duty payable based on the import declaration form (Customs Form No. 1 (K1), and other reference documents. This tax code is applicable for all GST registrants, unless the imported goods are for storage in a licensed warehouse or Free Trade Zone, or are imported by a GST registrant who is an approved person under a special scheme such as the Warehouse Scheme, or the Approved Trader Scheme.

This refers to the total value of goods imported under the Approved Trader Scheme (ATS), where GST is suspended when the trader imports the goods into Malaysia. This scheme is designed to ease the cash flow of traders with significant imports. Approved persons under ATS must declare the total value of the goods imported and the GST amount suspended under ATS in field (14) & field (15) of the GST-03 return.

This refers to GST incurred by a GST registered trader who is not allowed to claim the input tax incurred. The expenses include the following:

• The supply to or importation of a passenger car;
• The hiring of passenger car
• Club subscription fees (including transfer fee) charged by sporting and recreational clubs;
• Medical and personal accident insurance premiums by your staff
• Medical expenses incurred by your staff.  This excludes those covered under the provision of the employee’s Social Security Act 1969, Workmen’s Compensation Act 1952 or under any collective agreement under the Industrial Relations Act 1967;
• Benefits provided to the family members or relatives of your staff;
• Entertainment expenses for a person other than employee or existing customer, except entertainment expenses incurred by a person who is in the business of providing entertainment.

This refers to the purchase of goods and services from a non-GST registered supplier/trader. A supplier/trader that is not registered for GST is not allowed to charge and collect GST.

This refers to goods and services purchased from GST registered suppliers where GST is charged at zero-rated or 0%. This is also commonly known as zero-rated purchases. The list of zero-rated purchase as prescribed in GST (Zero-Rated Supply) Order 2014.

This refers to the purchase of exempt supply such as residential properties or certain financial services where there no GST was charged, as it is exempt from GST. Consequently, no input tax is incurred on these supplies. Examples of the supply of goods and services as an exempt supply are prescribed in the GST (Exempt Supply) Order 2014.

This refers to the purchase of goods that are classified as being outside the scope of GST. Example of out of scope purchases are non-business purchases, purchase of services by a person who does not belong in Malaysia other than the supply of imported services, purchase from government supply, except selected government supplies prescribed in the GST (Application To Government) Order 2014, and purchase of goods made for supply outside Malaysia.

This refers to the purchase of goods which have been given relief from charging and payment of GST. Example for this tax code are the purchase of RON95 petrol, diesel and other supplies as prescribed under GST (Relief) Order 2014.

This refers to purchase transactions that are disregarded from charging and payment of GST under GST legislation. Examples are purchases within the GST group registration, purchases made within a Warehouse Scheme and other disregarded supplies.

This refers to any adjustment made to Input Tax, such as bad debt relief & other input tax adjustments.

This refers to purchase from a person who qualifies for Flat Rate Schemes where Flat Rate Addition is charged at 2%. The Flat Rate Scheme (FRS) is applicable to farmer/fisherman/livestock breeder who is not registered under GST because his yearly turnover is below the prescribed threshold limit (RM500,000) and he is not voluntarily registered under GST.

This refers to GST incurred with purchases, where the company chooses not to claim the input tax. This tax code is not mapped in field 6a & 6b of the GST-03 return, and results as an expense of the company.

This tax code is applicable for transactions that are treated as neither a purchase of goods nor a purchase of services, so no GST is incurred. For example, users can assign this tax code for purchases under the Second Schedule of GST Act 2014 for supplies that are treated as neither a supply of goods nor a supply of services, such as the purchase of Transfer of Going Concern (TOGC), a purchase from any society or similar organization, insurance indemnity settlement, and diplomatic/consular services.

This refers to all capital goods imported into Malaysia that are subject to GST. The GST amount is calculated on the value, which includes cost, insurance and freight plus the any customs duty payable based on the import declaration form (Customs Form No. 1 (K1), and other reference documents).

A GST registered supplier must charge and account GST at 6% for all sales of goods and services made in Malaysia, unless the supply qualifies for zero-rated, exemption or falls outside the scope of the GST legislations. The GST collected from customers is called output tax. The value of the sale and corresponding output tax must be reported in field (5a & 5b) in the GST-03 return.

Zero-rated supply is a taxable supply, which is subject to a rate of zero percent. A GST registered supplier can zero-rate (i.e. charge GST at 0%) certain local supply of goods and services, and the supplier has to declare the value of this zero-rated supply under field (10) of the GST-03 return. Examples of zero-rated supply, as prescribed in the tariff code in GST (Zero-rated Supply) Order 2014, are milled-rice, fresh fruit, and live animals (cattle, buffalo, goat, sheep and swine).

This refers to the supply of goods from Malaysia to a Designated Area (Pulau Langkawi, Labuan, & Pulau Tioman) that qualifies for a zero-rate if the movement is supported with a Customs No. 2 Form, which states the supplier’s name and address as the consignor, and the recipient’s name and address in the DA as the consignee, with supporting documents such as an invoice, packing list, etc. Thus, the exportation of goods from Malaysia to a Designated Area is subject to zero-rated supplies, and the supplier has to declare the value of this export under field (10) of the GST-03 return. For more information, please refer to GST (Zero-Rated Supply) Order 2014 and the Guide on Designated Area.

A GST registered supplier can zero-rate (i.e. charge GST at 0%) the supply of goods that qualify for zero-rate, if the movement of goods is supported with a Customs No.2 Form (K2), which states the supplier’s name and address as the consignor, and the overseas recipient’s name and address as the consignee. Also, the supply of services falls within the description of zero-rated if the services are attached with supporting documents such as an invoice for an international service. Examples include the sale of air-tickets, and international freight charges. The supplier has to declare the value of this export under field (11) of the GST-03 return.

GST is chargeable on supplies of goods and services. For GST to be applicable, there must be goods or services provided, and a consideration paid in return. However, there are situations where a supply has taken place even though no goods or services are provided or no consideration is paid. These are known as deemed supplies. Examples include free gifts (more than RM500) and thedisposal of business assets without consideration.

Out of scope supply is a supply which is not within the ambit or boundary of GST, and, therefore, GST is not charged. Examples of out of scope supply are non-business supply, and supply by statutory bodies and local authorities with respect to regulatory and enforcement functions, and supply of goods made outside Malaysia, government supply, except selected government supplies prescribed in the GST (Application To Government) Order 2014.

This refers to supplies that are exempt under GST legislations. Exempt supply is a supply which is not subject to GST, and no GST is charged. Examples of exempt supply of services are domestic transportation of passengers by mass public transport i.e. by rail, ship, boat, ferry, express bus, stage bus, school bus, feeder bus, workers’ bus and taxi, toll highway, private education and private health services. Examples of exempt supplies of goods are residential properties, land for agricultural use and land for general use as burial ground, a playground or religious building. The supplier has to declare the value of this exempt supply under the field (12) of the GST-03 return.

This refers to exempt supplies made under incidental exempt supplies, and is applicable for wholly taxable suppliers and partially exempt trader/mixed suppliers. Incidental exempt supply is a supply of financial services made by a registered person who is not in the business of providing the financial services. Incidental Exempt Supplies, as prescribed in Reg. 40, GST Regulations 2014, includes interest income from deposits placed with a financial institution in Malaysia, interest received from loans provided to employees, factoring receivables, and realized foreign exchange gains. The supplier may declare the value of this incidental exempt supply under field (12) of the GST-03 return. (Note: Replace ES43)

This refers to supplies that are given relief from GST. For example, as in Goods and Services Tax (Relief) Order 2014, educational institutions are given relief from the payment of GST on the acquisition of goods.

In certain circumstances, a taxable supply may be disregarded for the purpose of GST. Under GST legislation, examples of disregarded supplies include the supply of goods or services between members of a GST group, the supply of goods within warehouses under the Warehousing Scheme, and the supply of goods by a principal who is a taxable person to an agent who is acting in his own name as an auctioneer.

This is any adjustment made to Output Tax, Examples are a longer period adjustment, bad debt recovered, outstanding invoices more than 6 months, & other output tax adjustments.

This refers to standard-rated supplies under a Margin Scheme. A margin scheme allows an approved person, as defined under regulation 75 of the Goods and Services Tax Regulation 2014 (GSTR), who meets all the conditions imposed under regulation 77 of the GSTR 2014, to calculate and charge GST on the margin i.e. the difference between the price at which the goods are supplied (selling price) and the price at which the goods were acquired (purchase price). If there is no margin (because the purchase price exceeds or equals the selling price), then no GST is imposed.

Based on the Sec. 73(2) Approved Jeweller Scheme GST Act 2014, any taxable person who makes any prescribed supply of goods to the approved jeweller shall charge tax, and is not liable to account for tax on the prescribed supply. Any taxable person (approved jeweller) is not required to pay the tax charged to him by the supplier but shall account for the tax in his GST-03 return. This tax code is applicable only for an approved person (Gold Bullion House/Bank) of Approved Jeweller Scheme.

This refers to supplies treated as neither a supply of goods nor a supply of services, and no GST is chargeable.

This refers to out-of-scope supplies made outside Malaysia, which would be taxable if made in Malaysia. The out-of-scope supply must comply with the Malaysia GST legislations to fulfill these tax code conditions. The OS-TXM is applicable for calculating the input tax recoverable ratio (IRR) as a “T” element in the standard method of apportionment formula.

This refers to a supply for which no tax is chargeable, such as the supply of goods between Free Zone areas. Moreover, there is no GST chargeable on the supply of goods and services within or between designated areas. The supplies have to be declared under Field 10 of the GST-03 return. This NTX is applicable for calculating the input tax recoverable ratio (IRR) as a “T” element in the standard method of apportionment formula.