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GST Mixed Supplier

Updated: Nov 24, 2022

The world now is in a consumerist paradise, with more and more things to spend money, and more and more ways to acquire the funds to spend. In the midst of this, governments have long implemented consumption taxes to get tax revenue from those spendings. In Malaysia, we have been used to Sales & Service Tax (SST), but from 2015-2018, Goods & Services Tax (GST) was in effect.

Now, in light of the possibility of GST’s return, this article along with many others of its series, delves into the various aspects of GST. This time, it will be on how a mixed supplier can claim their input tax.

Normal rule

We should 1st categorise our input tax as a mixed supplier.

Those directly attributable are either entirely allowed (taxable supply) or entirely disallowed (exempt supply), subject to a few exceptions such as non-business use and blocked input tax of course. Examples of input tax which are directly attributable are inventories, staff cost for those only involved in taxable/exempt supply etc.

The leftover, dubbed “residual tax”, cannot be so straightforwardly attributed as it is not clear how much is used for taxable supply and exempt supply. This category of input tax includes utility bills which premise is used for both supplies, managerial staff costs etc. Therefore, Royal Malaysian Customs Department (RMC) has provided guidance on how to apportion the tax, by splitting it based on taxable-to-exempt supply ratio, calculated as taxable supply divided by total supply.

De minimis

With that out of the way, let’s look at something interesting. Sometimes, businesses may make incidental exempt supply, such as providing a loan to a director. RMC provides the de minimis rule to businesses in the hopes of making input tax relating to the exempt supply also allowed.

To qualify for de minimis, the 2 conditions that must be satisfied are:

  • exempt supplies must not exceed RM5,000 per month; and

  • Value of exempt supplies must not be more than 5% of total value in that period.

If satisfied, all input tax will b