BRIEFING ON 'GOODS AND SERVICES TAX' BY THE ROYAL MALAYSIAN CUSTOMS
A briefing on Goods and Services Tax (GST) was given by the Royal Malaysian Customs at MIMA on 20 January 2010. The primary purpose of the briefing was to provide an overview of the proposed GST and its implications towards shipping sector in Malaysia. GST is a broad-based consumption tax which will be replacing the current Sales and Services Tax (SST). The GST is targeted to be implemented in October 2011.
Customs officers, Pn. Maria Madel, Pn. Chin Jek Bin, and En. Abdul Aziz, flanked by Director General of MIMA, Dr. Pola Singh (far right) and Senior Fellow, En. Nazery Khalid (far left)
Under the GST system, tax on the supply of goods and services can either be standard-rated, zero-rated or exempted. Standard-rated supplies are subject to a specific tax rate of 4%. Zero-rated supplies are also taxable supplies but at a zero rate. GST registrants are allowed to claim input tax credit on these taxable supplies from the Government. Exempted supplies are not subject to GST and hence, input tax credit is not recoverable.
According to the Customs officers, GST on most of the services provided in the shipping industry will be zero-rated. These services include navigation services, ship handling services, repair and maintenance services, and ship agency services, amongst others. However, not all shipping services are classified as zero-rated supplies. Services such as purchase of ships, domestic freight services, domestic ship rental, and certain services provided at ports (i.e. rental of warehouses, rental of machinery, services of handling local movement cargo, and services that are not connected directly to ship anchored at the ports) are treated as standard-rated supplies.
In a nutshell, GST is not a cost to business as they are allowed to claim any GST paid on their inputs. Thus, the cascading effect or double taxation is avoided in the system. GST is purely a consumption tax and therefore it is borne only by final consumers. Since most services in the shipping industry are zero-rated, they stand to benefit from the system as no GST is imposed on the supplies and yet businesses are eligible to claim input tax credit.
The briefing was informative for all the participants. The knowledge gained is especially useful to researchers at the Centre of Maritime Economics and Industries (MEI) for their study on the implications of GST on the shipping sector and supply chain.
Customs officers conducting the briefing
