CTIM - Comments On DRAFT GST Guide - Registration (F310513) PDF

CHARTERED TAX INSTITUTE OF MALAYSIA
(225750-T)
COMMENTS ON
GOODS AND SERVICES TAX
(GST) GUIDE
REGISTRATION
31 May 2013
Prepared by:
TECHNICAL COMMITTEE -- INDIRECT TAX (TC-IT)
Unit B-13-1 (Unit 1-5), 13th Floor, Block B, Megan Avenue II, No.12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel: +603-2162 8989
Fax: +603-2162 8990, 2161 3207
Email: technical@ctim.org.my
(225750-T)
COMMENTS ON
GOODS AND SERVICES TAX (GST) GUIDE
REGISTRATION
Contents
Page
No.
Preamble
Specific Comments:
1
Item 2.1
: Who shall register under GST?
3-4
Item 2.2
: What is a taxable supply?
5-6
Item 2.4
: How to determine taxable turnover for GST registration?
6-7
Item 2.5
: How to determine the twelve-month period?
Item 3
: Effective Date of Registration
Item 5.3
: Responsibilities of a registered person?
11
Item 6
: Registration for Transfer of Business As a Going Concern (TOGC)
12
Item 13
: Registration of Partnership
24
Item 14
: Joint Venture
26
10
Item 16
: Single Taxable Person
29-30
11
Item 20
: Late Registration
33-34
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Unit B-13-1 (Unit 1-5), 13 Floor, Block B, Megan Avenue II, No.12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel: +603-2162 8989
Fax: +603-2162 8990, 2161 3207
(225750-T)
PREAMBLE
The Technical Committee-Indirect Tax (TC-IT) of the Chartered Tax Institute of Malaysia
(CTIM) would like to commend the Royal Malaysian Customs (RMC) for engaging the Institute
to provide feedback on the draft Goods and Services Tax (GST) Guide Registration.
GENERAL COMMENT
1.
Reference to the GST Act, relevant Gazette Orders, and GST Guides
CTIM is of the view that wherever relevant, the guide should indicate the statutory
reference, i.e. provisions of the GST Act and the relevant GST Gazette Orders and
Regulations. This will allow readers, including taxable persons, agents, tax advisers,
academicians, etc. to understand the framework of GST clearly and thereby facilitate
compliance.
SPECIFIC COMMENTS
The following are the views and comments of CTIM for the consideration by the authorities.
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CTIMs Comments:
Since the first criterion to determine whether registration for GST is required is whether
the seller is carrying on a business, it may be useful that the Guide explain what
constitutes carrying on a business and indicate what is not considered as carrying on a
business.
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CTIMs Comments:
To make the illustration clearer, the Box You may register voluntarily may be rephrased as You are not required to register but you may choose to register voluntarily.
We propose that a title, such as Flowchart to determine requirement for GST registration
be provided for the above chart.
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CTIMs Comments:
Para 2.2 is not clear and may confuse the user. We suggest that the term supply should
be explained first and then indicate the parameters for determining whether a supply is a
taxable supply.
Deemed Supply
We are of the view that the meaning and implication of supply of services to connected
person may not be well understood. For clarity, we propose to insert the following note
after the phrase supply of services to connected person:
Refer to Para 2, Third Schedule and Para. 5, First Schedule of the draft GST Bill 2009, for
the definitions of connected persons and supply of services to connected persons
respectively.
Diagrammatic illustration:
The current presentation creates confusion about the rate of GST for deemed supply, as it
appears that the items specified are neither zero-rated nor standard rated.
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We suggest that the diagram start with what is a supply and deemed supply, then
distinguish between taxable supply, exempt supply and out of scope supply. Finally, the
taxable supply could be further divided into zero-rated and standard-rated supply and
disregarded supply.
CTIMs Comments:
We propose the following amendments (underlined italics):
Item 2.4, Second paragraph, 1st sentence -- However, the following taxable supplies will
not be included:
Example 3 --- A car workshop has to include labour charges as well as cost of parts sale
value of parts replaced to ...
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CTIMs Comments:
We propose the following amendments (underlined italic):
Item 2.4 - Example 4: For GST registration purpose, the method to use for computing
taxable turnover depends on the business set-up category of person.
This is to bring it in line with the table following (which summarises various computing
methods for each category of person) and item 3.3 of the GST General Guide (Draft).
The table should be given a title or number for easy reference.
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CTIMs Comments:
Item 2.5 -
For purpose of clarity, we propose the following note be added after Diagram 1:
The effective date for GST registration is 1 July 2013 (first day of the following month
after the end of the twenty eight-day liability) since the annual taxable turnover has
exceeded the threshold limit on 31 May 2013.
Similarly, the following note should be provided after Diagram 2:
The effective date for GST registration is 1 August (first day of the following month
after the end of the twenty-eight day liability) since the annual taxable turnover has
exceeded the threshold limit on 30 June 2013.
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CTIM Comments
Since the reference points of Historical Method and Future Method are different, will the
Customs adopt Future Method in an audit to penalise a taxable person who uses Historical
Method? This needs to be clarified in the Guide to clear the doubt of the taxpayers.
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CTIMs Comments:
Penalty on the failure to submit the GST return has not been mentioned in the above.
We propose that a new clause be inserted (i.e. 5.4) to specify the penalty on failure of
submission of the GST return.
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CTIMs Comments:
Item 6 - 3rd paragraph: The transferee must apply for registration within twenty eight
days from the date of transfer of business.
For purpose of clarity, we suggest that Customs provide further explanation - that the
registration is required if the transferee has not registered at the time of transfer. If the
transferee is already registered, he is not required to apply for a new registration.
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CTIMs Comments:
We are of the view that the examples of Item 9 - Voluntary Registration, do not take into
consideration the input tax credit and the impact of output tax on the various customers
and therefore the conclusion may not be accurate. The fact that the output tax of the seller
will be the input tax credit of the buyer, will affect the sellers product market acceptance,
as a non-registrant will be unable to provide input tax credit for the buyer.
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(225750-T)
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CTIMs Comments:
The Institute would like to seek clarification whether the residential status of the
individual who controls the group of companies has an impact on the admission as a
group? If so, whether the residential status is confined to citizenship status or tax
residence status? In item 12.3, Example 1 above, whether the group treatment will be
allowed if Ali bin Ahmad is
(i)
A non-Malaysian citizen
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(ii)
(225750-T)
A non-resident (for tax purposes) in Malaysia
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CTIMs Comments:
Item 13 - Example 1
We are of the view that, for the ease of understanding of the above example, instead of
indicating Restaurant Sedap (PJ) and Restaurant Sedap (KL), we propose that Customs
consider stating that the Restaurant Sedap has 2 branches i.e. in PJ and KL.
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CTIMs Comments:
Item 14
It is mentioned in the above that registration of joint venture for GST purpose only applies
to petroleum upstream activity under the Production Sharing Contract (PSC). CTIM
proposes that Customs consider including the property developer and construction
industries as well, for registration of joint venture for GST.
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CTIMs Comments:
Item 16 The effective date for single taxable person registration is the date as
specified in the direction.
It is unclear whether the registration will take effect prospectively or retrospectively.

Section 23(1) of the Draft GST Bill (page 33), stipulates that
23(1) Without prejudice to section 20, where the Director General is satisfied that any
separation of business activities is artificial resulting in an avoidance of tax, he may
make a direction directing that the persons named in the direction be treated as a
single taxable person carrying on the activities of the business described in that
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direction and that single taxable person shall be liable to be registered with effect from
the date specified in the direction.
For clarity purposes, we propose that Customs consider providing clarification in this
guide that the effective date of the registration should take effect on a moving forward
basis.
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CTIMs Comments:
Item 20 Late registration
It is not mentioned in the above whether a person who has made a late registration can
recover the input tax credit. There is also no clarification whether he can back-charge the
GST during the period he becomes liable to be registered, especially to GST registered
customers.
Based on GST General Guide (draft) (page 56; item 10.8.3: Late Registration), it is
mentioned that any taxable person is entitled to claim input tax incurred (up to a
maximum period of 6 years) in making taxable supplies during the period he becomes
liable to be registered.
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We also wish to refer to the Proposed Amendment to GST Bill 2009, Clause 38 (Credit for
input tax against output tax) on the new provisions due to the insertion of subsection 13,
which states that:
(13) Notwithstanding any provision of this Act, where any taxable person fails to comply
with subsection 21(1) or 21(3)
(a)
no refund shall be made under subsection (3) if the amount of credit exceeds the
output tax for the period he should have been registered; or
(b)
the taxable person shall not be entitled to any credit of input tax under subsection
(1) if he fails to include such credit in the return referred to in paragraph
41(2)(a).
CTIM would like to propose that the Customs consider including the above clarification on
the new Clause 38(13) as well in this draft guidelines for better explanation.
Example 2
CTIM is of the view that calculation of the penalty for late registration should be based on
GST inclusive. Hence, the penalty calculation is as follows:
Amount of tax payable
: RM100,000 x 4/104 = RM3,846
Late registration period
: 1.7.2012 31.8.2012 (62 days)
Rate of penalty
: 13%
Amount of penalty payable : RM3,846 x 13% = RM500

Total amount payable
: RM4,000 + RM500 = RM4,500
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CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

: Who shall register under GST?

: What is a taxable supply?

: How to determine taxable turnover for GST registration?

: How to determine the twelve-month period?

: Effective Date of Registration

: Responsibilities of a registered person?

: Registration for Transfer of Business As a Going Concern (TOGC)

: Single Taxable Person

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

A non-resident (for tax purposes) in Malaysia

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

It is unclear whether the registration will take effect prospectively or retrospectively.

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

CHARTERED TAX INSTITUTE OF MALAYSIA

Item 20 Late registration

CHARTERED TAX INSTITUTE OF MALAYSIA

: RM100,000 x 4/104 = RM3,846

Late registration period

: 1.7.2012 31.8.2012 (62 days)

Amount of penalty payable : RM3,846 x 13% = RM500

: RM4,000 + RM500 = RM4,500

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