News and Insights

Implementation of Malaysia GST Requires Businesses to Register Starting October 1, 2014

Tax Development Sep 11, 2014

On October 25, 2013, the Malaysian Minister of Finance confirmed that Goods and Services Tax (GST) will be introduced on April 1, 2015 with a standard rate of 6%. Businesses impacted by this tax regime change will be required to register with the governing tax authority by January 1, 2015. The registration window opens on October 1, 2014.

The tax will be chargeable on goods and services at all levels, including production, manufacturing, wholesale, and retail; will be levied on goods and services supplied in Malaysia or imported from outside of Malaysia; and will replace the existing sales tax and service tax regimes from  April 1, 2015.

This decision closes the possibility of Federal Insurance Contributions Act (FICA) refunds arising from severance payments triggered from supplemental unemployment compensation benefits. The decision of the court was by an 8-0 margin. (Justice Kagan did not take part.)

GST is charged on any taxable supply of goods and services made in the furtherance of any business by a GST-registered (or taxable) person in Malaysia. It is also levied on the importation of goods and services into Malaysia. As a broad-based tax, GST will be applied at the standard rate (i.e., at 6%) by default unless specific exceptions apply under the law. There are limited reliefs and exemptions to specific categories of goods and services to be either zero-rated or exempt supplies.

Most organizations doing business in Malaysia will be affected by the implementation of GST.  Specifically, businesses that are required to be registered for GST will need to regularly charge and account for GST due on their business supplies and pay the collected GST to the Malaysian Customs Department. These businesses will also need to issue proper tax invoices, comply with the relevant record-keeping requirements and make the necessary monthly/quarterly GST return filings.

The GST registration threshold is set at RM500,000 (approximately US$160,000) for sales turnover made in the past year, based on a rolling 12-month period (i.e., based on taxable revenue—standard-rated and zero-rated supplies). A business will also be required to register at any time if this registration threshold is expected to be breached.

Nigel Mellor, Principal and Practice Leader for the Ryan Singapore office commented, “Given the radical nature of the changes, complying with these obligations will require most businesses to start planning and acting now to be fully prepared for the GST implementation on April 1, 2015. The new GST regime in Malaysia represents a major change from its current consumption tax system (i.e., sales and service tax regimes). Therefore, implementation of the new tax will mean significant changes for all businesses operating in Malaysia. At a business operating level, the GST implementation will impact upon various business functions and affects people, systems and processes.”


Nigel Mellor
+65 6248 4600 

Wei Hann Tan
+65 6248 4600