| ISSUE NO. |
TOPIC |
PARTICULARS |
LEGISLATIVE OR GUIDANCE REFERENCE |
Technical Analysis |
Last Updated |
| A |
SALE OF REAL PROPERTY |
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| A1 |
What are the GST classifications for real properties? |
Supply of real property is treated as supply of goods. Broadly, real property can be treated as exempt (residential property) or taxable (other properties). Where a property is treated as exempt, the input tax credits cannot be claimed. Where a single development involves both supply types, it will be necessary to apportion input tax credits between exempt (non-recoverable) and others. |
cl. 9 and 18 of the GST Bill |
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24-Dec-13 |
| A2 |
When is GST triggered on a sale of property? |
The sale of real property is treated as a supply of goods. The time of supply occurs at the earlier of when goods are made available, the issuance of a tax invoice or payment. |
cl.11(2)(b) and 11(4) of the GST Bill |
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24-Dec-13 |
| A3 |
Is a deposit paid for the sale of real property likely to trigger GST? |
Until a deposit is applied as consideration for the sale, it will not trigger GST on its own. |
cl.2 of the GST Bill, under definition of "consideration" |
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24-Dec-13 |
| B |
RESIDENTIAL PROPERTY CLASSIFICATION |
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| B1 |
When a company enters a sale and leaseback arrangement for a condominium (or more) with a unregistered individual investor, is the sale subject to GST? |
A condominium is classified as residential property. Where the condominium is sold to an individual investor, the transaction is likely to be treated as exempt for GST purposes. |
cl. 18 of the GST Bill |
TA-B1 |
24-Dec-13 |
| B1(i) |
When a company enters a sale and leaseback arrangement for a condominium (or more) with a unregistered individual investor, is the lease subject to GST? |
The leaseback from an unregistered investor will be out of scope for GST purposes. Depending on the underlying terms and conditions of the leaseback, the subsequent rental/lease of properties may be treated as exempt or taxable. |
cl. 9 and 18 of the GST Bill. |
TA-B1 |
24-Dec-13 |
| B2 |
Is the classification of a property as "residential property" based on zoning, or usage? |
There is no particular guideline on this issue. However, from verbal discussions conducted with RMC, we understand the current RMC interpretation is to base classification on "intended usage". |
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TA-B2 |
24-Dec-13 |
| C |
CONSTRUCTION CONTRACTS* |
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| C1 |
Is the construction service of residential property subject to GST? |
Construction services are not specifically listed as an exempt or zero-rated supply under the GST law. Consequently, construction services (including those relating to residential property) will be taxable unless an exception applies. |
cl. 9 of the GST Bill |
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24-Dec-13 |
| D |
LEASING OR MANAGEMENT OF PROPERTY (INCLUDING HOTEL OPERATORS) |
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| D1 |
Is leasing of property considered carrying on a business under the GST Law? |
The admission of any person to any premises for consideration is deemed as a business. Therefore, it is regarded as a business under the GST law and requires registration if other requirements are satisfied. |
cl. 3(2)(b) of the GST Bill |
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24-Dec-13 |
| D2 |
What premises are likely to be treated as non-residential properties? |
A hotel, motel or ship providing short term accommodation are likely to be considered to be non-residential properties. However, the intepretation is likely to present challenges. |
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24-Dec-13 |
| D3 |
What are the GST classifications of the various charges made by a hotel? |
Hotels typically charge for a room, food and beverages and tours and sightseeing. All of these supplies would be standard rated/taxable. Where a hotel also supplies currency exchange services, these are exempt financial supplies but may be disregarded as incidental. In those cases, there would be no need for the hotel to apportion inputs because of the currency exchange supplies. |
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24-Dec-13 |
| D4 |
What happens where a guest stays more than 28 days? |
The basic rule is that the room charge becomes an exempt supply, ie no GST will be charged but the associated input tax credit becomes irrecoverable. There is a de minimus rule that states that where the value of the supply does not exceed RM 5,000 and is less than 5% of the total taxable and exempt supplies for the month, it can be disregarded and still treated as taxable. |
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24-Dec-13 |
| D5 |
What would be the GST treatment of other charges, food and beverage, where the guest stays 28 days? |
Charges such as food and beverages will still be standard rated where the guest stays for longer than 28 days. |
cl. 9 of the GST Bill |
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24-Dec-13 |
| D6 |
What is the GST classification of the charge made for staying at an apartment? |
The charge made for staying at an apartment may be regarded as an exempt supply. |
cl.18 of the GST Bill |
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24-Dec-13 |
| E |
TIME SHARE |
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| F |
TRANSITIONAL ISSUES# |
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| F1 |
What is a non-revewable contract? |
A contract with no opportunity to review means any written contract or agreement which has no provision for a general review of the consideration for the supply for such a period until a review opportunity arises. Court cases decided in Australia where there was a similar transitional provision suggest that a review opportunity arises only if the whole or nearly all of the consideration for the supply is capable of review; e.g. only 83% of the consideration for the supply was reviewable; no review opportunity.' |
c191(3)(a) of the GST Bill; Federal Commissioner of Taxation v DB Rreef Funds Management Ltd; Westley Nominees Pty Ltd v Coles Supermarkets Australia Pty Ltd |
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24-Dec-13 |
| F2 |
What is the GST classification of a non-reviewable contract? |
The supply will be zero-rated until he earlier of 1 April 2020 or when a review opportunity arises. |
c191(2)(a) & (b) of the GST Bill |
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24-Dec-13 |
| F3 |
Are there any other conditions attached to the non-reviewable contract classification? |
The RMCD guide on transitional rules contains additional conditions which presently do not appear in previous GST Bill. These include that the agreement must have been signed before 1 April 2013 and the recipient of the supply must be making taxable supplies himself. It is likely that any contract signed after 1 April 2013 will not be zero-rated and will be taxable from 1 April 2015. |
RMCD Guide on Transitional Rules |
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24-Dec-13 |
| F4 |
What happens if a review opportunity arises but the contract doesn't allow me to increase my charge? |
GST is a suppliers tax, and any liability for payment lies with the supplier even though the supplier may recover the GST from the recipient. If the terms of the agreement do not allow the supplier to increase the consideration for GST, the supplier will lose some of the consideration as GST. |
c15 of the GST Bill; see also Coles Supermarkets |
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24-Dec-13 |
| F5 |
What can a supplier do to protect himself? |
Any contract/agreement signed after 25 October 2013 (budget announcement of GST implementation) should contain a GST/Taxes clause that enables the supplier to increase the consideration to include the GST. |
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24-Dec-13 |
| F6 |
What is a revewable contract? |
A reviewable contract means any written contract or agreement which provides for a general review of the consideration or contemplates a change to the price or consideration of the goods and services to be supplied under the contract |
c191(3)(b) of the GST Bill |
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24-Dec-13 |
| G |
SUNDRY MATTERS |
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* Please also refer to the draft specific guide issued by RMC for the construction industry |
| # Please also refer to the draft specific guide issued by RMC regarding transitional rules |
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