Input tax is the GST incurred on any purchase or acquisition of goods and services by a taxable person for the purpose of making a taxable supply in the course or furtherance of business. These purchases or acquisitions would include:
(a) goods or services purchased or acquired locally;
(b) imported goods;
(c) imported services;
Allowable Input Tax
Business versus Non-Business Use
Input tax incurred can be claimed if the goods or services are acquired for business purposes. Often there will be situations where suppliers acquire goods and services which may be used for both business and non-business purposes.
(a) Used Wholly for Business
When goods and services are acquired for business purposes, the registered person is eligible to claim input tax on the GST that has been incurred.
Supplies Eligible for Input Tax
Generally, a taxable person is eligible to claim input tax which is attributable to the making of the following supplies:
(i) taxable supplies;
(ii) inputs used for making taxable supplies outside Malaysia which would be taxable supplies if made in Malaysia;
(iii) any other supplies as may be prescribed.
Supplies Used for Making Taxable Supplies
Taxable supplies would include standard-rated and zero-rated supplies. There are taxable supplies which would be disregarded for GST purpose. Examples of disregarded supplies are:
(a) supplies made between members of a GST group;
(b) supplies of goods made in a warehouse under warehousing scheme before the goods are removed from the warehouse;
(c) supplies between venture operator and the venturers; and
(d) supplies by the approved toll manufacturers to the overseas principal.
Any GST incurred on purchases used to make the above disregarded supplies can be claimed as input tax.
Inputs used for making supplies made outside Malaysia would however be taxable supplies if they were made in Malaysia.
Input tax incurred can be claimed in respect of the supplies made outside Malaysia which would be taxable supplies if they were made in Malaysia.
Non-Claimable Input Tax
Generally, a taxable person is entitled to claim GST on inputs attributable in making taxable supplies. The following persons are however not entitled to claim input tax.
(a) a non-registered person making taxable supplies;
(b) a person making an exempt supply;
(c) a person making an out of scope supply (an out of scope supply is a supply which is outside the scope of the GST Act. Out of scope supplies are not subject to GST.)
Article is written by Ng Choon Jin, CA(M), FCCA, ACTIM, Executive Director of S.L. NG Tax Services Sdn Bhd. Log on to www.slng2u.com for more information. The article represents his personal views.