COMMENTS FROM MEMBERS ON GOODS AND SERVICES TAX DG’S DECISIONS 4-2015

GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
1. / Localcompany(LC)purchasedgoodsfromoverseassupplier(OS)andlatersoldthegoodstolocalbuyer(LB)andissueaninvoice(localinvoice).TheLCrequeststheoverseassuppliertodeliverthegoodsdirecttohis localbuyer(LB).
Whether thesupply madebyLC toLBsubject toGST? / The supplymadebyLCtoLBwillqualifyforanoutofscopesupply, subjecttocompliancewiththefollowing conditions-
(a)ThereisproofthatthetransferofownershipofthegoodstookplaceoutsideMalaysiabeforethegoodsareimportedintoMalaysia(throughshippingdocumentor incoterm);
(b)TheimportdeclarationwasinthenameofLBandthevalueoftheimportedgoodswasbasedonthelocalinvoicewhichstatedthatthegoodsareoriginatedfromOS;
(c)LC mustkeepandmaintainthefollowing documents–
(i)Purchaseorderfrom LC toOS;
(ii)Invoicefrom OS to LC;
(iii)TaxinvoiceissuedbyLCtoLBstatedthatthegoods areoriginatedfromOS;
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(iv)Written instruction from LC to OS that the purchase goods is to be exported to LB; and
(v)Proof of payment from LC to OS and from LB to LC;
(d)LBmust keepandmaintainthefollowing documents–
(i)Purchaseorderfrom LB toLC;
(ii)Taxinvoice issuedbyLC toLB;
(iii)Proofofpaymentfrom LB toLC;
(iv)Import declaration form under LB’s name asconsignee;
(v)Billoflading/airwaybillstatingthefollowingdetails:
(aa) OS astheshipper;
(bb) LB asthe consignee;
(cc) LC as a notifyparty.
(e)AnyothernecessaryconditionsastheDirectorGeneralmayrequire fromtimetotime.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
2. / Localcompany(LC)purchasedgoodsfromalocalmanufacturer(LM)andrequestLMtoexportthegoodstohisoverseasbuyer(OB).
Whether thesupplymadeby LMto LC qualifyforazerorate? / (1)ThesupplyofgoodsmadebyLMtoLCisastandardratedsupply,becausethetransferofownershipofthegoodstookplaceinMalaysia.Howeversuchsupplywillqualifyforazeroratesubjecttocompliancewiththefollowing conditions–
(a)Thesupplyisrelatedtogoodsotherthanwine,spirit,beer,intoxicatingliquor,maltliquor,tobaccoandtobaccoproducts;
(b)LMmustkeepandmaintainthefollowingdocuments–
(i)Purchaseorderfrom LCtoLM;
(ii)TaxinvoiceissuedbyLMtoLCandshippedtoOB
(iii)WritteninstructionfromLCthatthepurchasegoodsis tobeexportedtoOB
(iv)Proofofpaymentfrom LC to LM
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
2. / (v)ExportdocumentsuchasK2/K8whereitisstatedthattheconsignorisLMandtheconsignee is OB;and
(vi)Billoflading/airwaybillstatingthefollowingdetails:
(aa) LMas theshipper;
(bb) OB astheconsignee; and
(cc)Indicateundercolumn“NotifyParty”thedetailsofOBorhisrepresentativeandLC astheownerof thegoods.
(c)LMmustexportthegoodswithin60daysoranyextendedperiodasapprovedbytheDirectorGeneral (DG)fromthetimeofsupply;
(d)TimeofsupplyforLMisthedateofinvoiceissuedor paymentreceived,whicheveris the earlier;
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(e)The local company (LC) must keep and maintain the following documents –
(i)Purchase order from OB to LC;
(ii)Invoice issuedbyLC to OB;and
(iii)ProofofpaymentfromOB toLC;
AND
(f)AnyothernecessaryconditionsastheDirectorGeneralmayrequirefrom timetotime.
(2)IfLMdoesnothavepossessionofthegoodstobeexportedorcontrolovertheexportarrangementhemusttreatthesalesaslocalsupplyandsubjecttoGSTat standardrate.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
3 / Localcompany(LC)sellgoodstooverseasbuyer(OB1)andOB1requestthegoodstobedeliveredtohislocalagent(LA)inPCAandsubsequentlythegoodsareexportedoutbyLAtoOB1customer’s in other countries(OB2).
WhetherthesupplymadebyLCtoOB1canqualifyforazerorate?
/ (1)ThesupplyofgoodsmadebyLCtoOB1issubjecttoGSTatstandardrateandnotqualifyforzerorateasthe goodsweredelivered intoPCA.
(2)ThegoodsexportedbyLAtoOB2arezeroratedsupplywithconditionsthattheexportformCustomsNo.2andshippingdocumentsindicatedthattheconsignoris LAandtheconsignee is OB2.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
4 / Localsupplier(LS)sellgoodstooverseasbuyer(OB)andtheOBrequestthegoodstobedeliveredtothethirdparty(TP)intheFreeCommercialZone(FCZ) forvalue addedactivityor consolidation.
Thethirdpartyrefers to anyagentappointedbythe OB.
Whether thesupply madebyLS toOBqualifyfor azerorate? / (1)Suchsupplyofgoodstotheoverseasbuyer(OB)willqualifyforazeroratesubjecttocompliancewiththefollowing conditions–
(a)Thesupplyisrelatedtogoodsotherthanwine,spirit,beer,intoxicatingliquor,maltliquor,tobaccoandtobaccoproducts;
(b)LSmustprovethatthegoodsisphysicallyremovedinto FCZ andsent toTP;
(c)LSmustkeepandmaintainthefollowingdocuments–
(i)Invoice issuedtotheoverseasbuyer;
(ii)Export,transitandotherrelateddocumentssuchascustomsformsandshippingdocumentsasrequiredunderthecustomslegislation;and
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(iii)Writteninstruction/agreementbytheoverseasbuyertosendthegoodstoathirdpartyintheFCZforvalueaddedactivityorconsolidation.
(d)TPmustkeepandmaintainthefollowingdocuments–
(i)Exportdocumentssuchasinvoices,customsforms,freezoneformsandshippingdocumentstoprovethatthegoods have been physically exported overseas;and
(ii)Otherrelateddocumentsreceivedfromthesupplier.
AND
(e) AnyothernecessaryconditionsastheDirectorGeneralmayrequirefrom timetotime.
(2)Ifthegoodsarenotexported physicallyoverseas,TPis liable to accounttheGST ata standardrate.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
5 / Localsupplier(LS)sellgoodstooverseasbuyer(OB)andtheOBrequestthegoodstobedeliveredtothethirdparty(TP)inthelicensedwarehouse (LW)forvalue addedactivityorconsolidation.
Thethirdpartyreferstoanyagentappointedbytheoverseasbuyer.
Whether thesupply madebyLS toOB qualifyforazerorate? / (1)Suchsupplyofgoodstotheoverseasbuyer(OB)willqualifyforazeroratesubjecttocompliancewiththefollowing conditions:
(a)Thesupplyisrelatedtogoodsotherthanwine,spirit,beer,intoxicatingliquor,maltliquor,tobaccoandtobaccoproducts;
(b)LSmustprovethatthegoodsarephysicallyremovedintoLWandsent toTP;
(c)LSmustkeepandmaintainthefollowingdocuments–
(i)InvoiceissuedtoOB;
(ii)Export,transitandotherrelateddocumentssuchascustoms formsandshipping
documentsasrequiredunderthecustomslegislation;and
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(iii)Instruction/agreementbyOBtosendthegoodstoathirdpartyintheLWforvalueaddedactivityor consolidation.
(d)TPmustkeepandmaintainthefollowingdocuments–
(i)Exportdocumentssuchasinvoices,customsformsandshippingdocumentstoprovethatthegoodshasbeenphysicallyexportedoverseas;and
(ii)Otherrelateddocumentsreceivedfromthesupplier;
AND
(e)AnyothernecessaryconditionsastheDirectorGeneralmayrequirefrom timetotime.
(2)ThegoodsremovedfromtheLWmustbeexporteddirectlyto overseas.
(3)Ifthegoodsarenotexportedphysicallyoverseas,TPis liable to accounttheGST.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
6. / WhatistheGSTtreatmentforgoodsmanufacturedlocallywhichissuppliedorsoldbyalocalsuppliertoanoverseasbuyerbutthegoodsareinthepossessionofthesupplierandsubsequentlyreleasedfor exportinstages as instructed bytheoverseas buyer? / (1)Suchsupplyofgoodswillqualifyforazeroratesubjecttocompliancewiththefollowing conditions–
(a)Thesupplyisrelatedtogoodsotherthanwine,spirit,beer,intoxicatingliquor,maltliquor,tobaccoandtobaccoproducts;
(b)Thesuppliermustissueinvoicebeforethegoodsare exportedtotheoverseasbuyer;
(c)Thetimeofsupplywillbeinvoiceissuedorpaymentreceivedwhicheveris theearlier;
(d)Thegoodsarephysicallyexportedwithin60daysfromthetimeofsupplyoranyextendedperiodasapprovedbythe DirectorGeneral(DG);
(e)Thesuppliermustexportthegoodsinhisnamethroughhisappointedfreightforwarderor through his overseas buyer’s appointed freight forwarder;
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(f)Thesuppliermustkeepandmaintainthefollowing documents–
(i)Agreementwiththeoverseasbuyerwhichshows that theyagreed to suchtransaction;
(ii)Theexport,transitandotherrelateddocumentssuchascustomsformsandshippingdocumentsasrequiredunderthecustoms legislation;
(iii)Purchaseorderfromoverseasbuyertothesupplier;
(iv)Supplier’ssaleinvoicetooverseasbuyer;and
(v)Anyotherrecords astheDGmaydetermine.
AND
(g)AnyothernecessaryconditionsastheDirectorGeneralmay requirefrom timetotime.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(2)Ifthegoodsarenotexportedphysicallyoverseaswithin60daysfromthetimeofsupplyoranyextendedperiodasapprovedbytheDirectorGeneral(DG),thesupplytotheoverseasbuyerisastandardratedsupplyandthesupplierhastoaccounttheGSTatastandardrate.
(3)Thesupplierwillnotqualifyforzeroratingifhedoesnothaveinhispossession thegoodstobeexportedordoesnothavecontrolover the exportarrangement.
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
7. / WhatistheGSTtreatmentonnon-recurringexpenditure(NRE)andothermanufacturingexpenditureconnectedtomanufacturegoods tobeexportedoverseas?
Thenon-recurringexpenses(relatingtogoods)incurredareforthepurchaseofmoulds,dies,tooling,jigs,fixturesandrelatedequipmentusedspecificallyforoverseasbuyer(OB)inthecontractmanufacturer’s(CM) premises. / (1)Thenon-recurringexpenses(NRE)incurredforthepurchaseofmoulds,dies,tooling,jigs,fixturesandrelatedequipment used specificallyforoverseasbuyer(OB)inthecontractmanufacturer’s(CM)premisesisnotsubjectedtoGSTifthecostrecoverydoesnotincludeanyelementofvalueadd.
Example–purchaseofmouldbyCMisRM100,000andtherecoveryfromtheOCisalsoRM100,000hence suchcostrecoveryisnot subject to GST.
(2)Thetreatmentaboveissubjecttocompliancewiththefollowing conditions–
(a)OwnershipofNREmustbeOCandnottobeaccountedasassetbyCM;
(b)Musthaveawrittenagreement/contractbetweenCMandOCregardingtheNREandtheexportation ofmanufacturedgoods;
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
(c)TheNRErelatingtothepurchasedgoodsareusedwhollytomanufacturegoodsto beexportedtooverseasbuyer;
(d)NREareincurredtomanufacturegoodsaccordingto specifications byOC;
(e)TheCMkeepsandmaintainexportandotherrelateddocumentssuchasCustomsNo.2/8forms,airwaybill,manifest,invoice,purchaseorder, paymentrecords, etc.;
(f)Whenthemoulds,dies,tooling,jigs,fixturesandrelatedequipmentanditscomponentsarenolongertobeusedasspecifiedinthecontract,thesegoodsmustbereturnedtotheOC.Ifsuchgoodsaredisposedlocally,itissubjecttoGSTatstandardrate;
AND
(g)AnyothernecessaryconditionsastheDirectorGeneralmay
GSTFAI 4-2015
NO. / ISSUES / RMCDECISION / MEMBERS COMMENTS
require from time to time.

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