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This article provides information that helps you set up Goods and Services Tax (GST) and Sales and Service Tax (SST) for a Malaysian company. It also explains the functionality that is provided for GST/SST.
GST is a multistage tax on domestic consumption. GST applies to all taxable supplies of goods and services in Malaysia, except those goods and services that are explicitly exempted. GST also applies to the importation of goods and services into Malaysia.
The Malaysian government replaced GST with SST as of September 1, 2018. The GST regime was in place since April 1, 2015.
Enabling the Malaysian GST/SST features
You can enable the GST/SST features only if the country or region of the legal entity's address is Malaysia.
GST/SST registration number
The GST/SST registration number appears on your tax invoices and some reports. You maintain it in the address information for your legal entity. First, define a registration type on the Tax registration type page. Make sure that the country/region code is MYS, and that the Primary for country/region checkbox is selected. Then, in the legal entity's primary address, add the tax registration number for GST/SST. Select the tax registration type that you defined, and then enter your GST/SST registration number.
General ledger parameters for GST/SST
On the General ledger parameters page, on the Sales tax tab, on the GST options FastTab, specify the following GST parameters.
| Section | Parameters |
|---|---|
| GST invoice |
|
| GST audit file |
|
| GST summary | Specify the information that should be included in the GST summary text of a GST invoice:
|
Debit notes and credit notes
The GST Act specifies the requirements for issuing credit and debit notes for a supply or purchase. You can now create and manage debit notes and credit notes for sales orders, free text invoices, purchase orders, and project invoices. When you print debit notes and credit notes, you see the following additional information:
- The words "Debit note" or "Credit note" in a prominent place
- The reasons why the debit note or credit note was issued
- The number and date of the original tax invoice
For Malaysia, the process for creating a credit note for a sales order is modified so that the invoice number and invoice date of the original invoice are included on the corresponding sales order lines. You can now follow the same steps to create a debit note, provided that it meets the following conditions:
- It has a reference to the original invoices.
- The total amount is positive.
For both debit notes and credit notes, you must provide a reason code on the sales order header. Similar functions are provided for free text invoices and purchase orders. You can create a credit note for a project invoice from the Sales order page, and you can also create a debit note for a project invoice.
GST invoices
Tax invoices are the most important documents in the GST system. They contain details about the registered person and supply, the GST rate, and the amount of GST that is payable under the GST Act. A tax invoice resembles a commercial invoice or receipt, but it contains additional information that the GST Act specifies.
A tax invoice can contain details about more than one supply (taxable supply and exempt supply). In this case, the tax invoice must clearly distinguish between the various supplies. This requirement applies to both full and simplified tax invoices.
The tax invoice must also separately indicate the applicable tax values and any tax that is charged on each supply for GST purposes. By modifying the parameters for the GAF summary, you can configure the indicators that distinguish the various supplies.
A sample tax invoice is provided that adds the following details to a standard sales invoice:
- The words "Tax invoice" in a prominent place
- The GST registration number
- The GST summary
To print a GST invoice for a sales order, on the sales order header, select GST invoice as the invoice type. However, to print a commercial invoice, select Invoice as the invoice type. You can also print simplified invoices for sales orders by changing the value of the GST invoice format field on the General ledger parameters page to Simplified invoice. A sample simplified invoice is provided. This invoice differs from the sample full tax invoice in that it omits the invoice title, and the name and address of the recipient. The same functionality is available for free text invoices.
The Sales Tax Act 2018 and the Service Tax Act 2018 governed the Sales Tax and Service Tax. The Sales Tax was a federal consumption tax that was imposed on a wide variety of goods, whereas the Service Tax was levied on customers who consumed some taxable services. According to those acts, any amount that is expressed in a currency other than the Malaysian ringgit must also be expressed in Malaysian ringgit. The selling rate of the prevailing exchange in Malaysia at the time of the sale of taxable goods is used.
Relief clauses on invoices
When the Minister grants your customers relief from the payment of all or part of the tax on a taxable supply of goods or services, or any importation of goods or classes of goods, you should issue tax invoices that include a regulated relief clause. Before you can issue tax invoices that include relief clauses, you must set up GST relief categories and GST relief groups. You must then assign products to a relief category and customers to a relief group. After you complete this setup, you can create sales orders to sell the items that are in the relief categories to the customers who are in the corresponding relief groups. A relief clause prints on the GST invoice.
Self-billed invoices
In some circumstances, the person who receives the goods determines the value of a supply. Therefore, for GST purposes, the recipient of the goods is allowed to issue an invoice to themself. This invoice is considered a tax invoice for the supply of goods or services to that person by another registered person. You can issue self-billed invoices only if you receive approval from the Director General. The reference number of the approval must be stated on the self-billed invoice. You can print a self-billed invoice only if the invoice type is set to GST invoice. You must also enter the approval number on the purchase order header. On the invoice, you see the following additional information:
- The words "Self-billed invoice" in a prominent place
- The approval number
- The GST summary
GST reports
The following out-of-box reports provide details about debit notes, credit notes, supplies, and purchases:
- Customer debit note and credit note list
- Vendor debit note and credit note list
- Supply list by tax code
- Purchase list by tax code
Additionally, a configurable GST report by configuration report is provided to meet the following reporting requirements:
- GST-03
- GST summary sheet
- Total acquisition and input tax
- Total supply and output tax
- Consolidated monthly record of total inputs and outputs of all group members for the taxable period
These reports have different formats, but they all display monetary amounts (transaction amount and GST amount) for specific transactions. To meet these requirements, you can configure the report content and then generate various reports according to your report configurations. To run the report, follow these steps:
- Define sales tax reporting codes.
- Map sales tax reporting codes to sales tax codes.
- Define the GST report configuration.
- Run the GST report by configuration report.
Defining sales tax reporting codes
The GST report by configuration report takes advantage of reporting code functions in Dynamics 365 Finance. Sales tax reporting codes collect the information for several sales tax codes onto one report line. In a typical setup, there's one sales tax reporting code for every calculated field on reports, and you create some predetermined reporting codes. However, because you can now define your own report configurations and specify which reporting codes to use, no predetermined codes are required. No specific report layout is introduced for Malaysia GST. You must use the Default report layout for your reporting codes.
Mapping sales tax reporting codes to sales tax codes
Before you can calculate values and show them on reports, specify a relevant sales tax reporting code for each tax code that you use in the sales tax payment process. On the Report setup tab, set a sales tax reporting code in one or more fields for each tax code.
Defining the GST report configuration
Create report configurations to meet your reporting requirements. Before you create a report configuration, determine what types of transactions to include. For example, if you create a configuration for GST returns, you can include the following types of transactions.
| GST report configuration name | Type of transaction | Transaction amount | GST amount |
|---|---|---|---|
| GST-03 | Bad Debt Recovered | 18 | |
| Bad Debt Relief | 17 | ||
| Total Input Tax (Inclusive of Bad Debt Relief & other Adjustments) | 62 | ||
| Total Output Tax (Inclusive of Bad Debt Recovered & other Adjustments) | 52 | ||
| Total Value of Capital Goods Acquired | 16 | ||
| Total Value of Exempt Supplies | 12 | ||
| Total Value of Export Supplies | 11 | ||
| Total Value of Goods Imported Under Approved Trader Scheme | 14 | ||
| Total Value of GST Suspended under item 14 | 15 | ||
| Total Value of Local Zero-Rated Supplies | 10 | ||
| Total Value of Standard Rated Acquisition | 61 | ||
| Total Value of Standard Rated Supply | 51 | ||
| Total Value of Supplies Granted GST Relief | 13 |
You must use different tax codes for those transactions. The way that you map reporting codes to these tax codes and then select them in the report configurations varies, depending on your overall reporting requirements. For example, a report shows the transaction amounts on your invoices, debit notes, and credit notes separately. Therefore, you map the various reporting codes (1001 for invoices, 1002 for debit notes, and 1003 for credit notes) to specific tax codes. However, if you must show a transaction such as Total Value of Standard Rated Supply in GST-03, you don't differentiate between credit notes, debit notes, and invoices. Therefore, you must select 1001, 1002, and 1003 for the transaction amounts.
Running the GST report by configuration report
After you post your transactions and set up your report configurations, you can run the GST report by configuration report. Provide the following parameters:
- Settlement period – Enter the settlement period for the report.
- From date – Enter the first date in the interval for this settlement period.
- Report configuration – Select one of the report configurations that you created.
GAF
The Royal Malaysian Customs Department (MRCD) periodically audits your business to make sure that you're making correct tax declarations. For auditing purposes, you can generate a GAF in XML format. The GAF contains a detailed breakdown of business transactions. It mainly contains the following information for a taxable period:
- Company information
- Purchases
- Supplies
- Ledger transactions
- Footer (Summary)
To generate the GAF, you must capture specific business data.
For the "Company information" section, specify the GAF version on the General ledger parameters page.
For the "Purchases" section, when you import goods from overseas vendors, capture the declaration number for each vendor invoice. In the GAF, consider transactions besides regular sales orders and purchases orders as purchases or supply. For example, you make payment to vendors, and you must also pay bank fees to banks. Per Malaysia GST regulations, GST applies to the bank charge. The bank provides a GST invoice to you, and you can claim the GST input tax. The tax authority expects to see that the bank charges are considered purchases in the GAF that is generated. In such cases, Finance lets users capture the required GAF information. You can now capture the organization number for a bank group. By default, payment fee transactions of corresponding banks are used. You can also enter required GAF information for various journals and payment fees, according to your business requirements. For example, you can enter GAF information for expense type journals in Project management and accounting, expense type service order lines, or expenses on expense reports. If any miscellaneous charges apply to a free text invoice or vendor invoice, the GAF information is inherited from the document. You can also preview the supply and purchase records where GST applies, and you can edit or add relevant information on the GAF purchase and supply review page. Make sure that you select the GST check box on the Sales tax codes page for each of your GST tax codes.
To generate the GAF, select Tax > Declarations > Sales tax > Generate GAF file, and provide the following required information:
- Settlement period – Specify the settlement period to generate the GAF for.
- From date – Enter the first date in the interval for this settlement period.
- Creation date – The GAF creation date. This information appears in the company section of the GAF.
- Posting layer – Specify which posting layers to generate the GAF from. The posting layers affect the ledger transactions that are included in the GAF.
Run the Settle and post sales tax process before you generate the GAF for a period. The GAF includes only those transactions that are included in a sales tax payment.