Claim expenses (Input Tax)
Our staff wants to claim for expenses incurred and we usually issued the cheque directly to the claimant name. On condition that the staff have to produce the receipt.
I understand that we can only claim if that company or business is a GST registered company/business but which of these expenses can we actually claim?
1. Poslaju (send documents locally) and stamps
2. Pantry expenses (eg Nescafe at KK Mart, tissue, toilet tissue, biscuits)
4. Refreshments for meeting (eg. sandwich, juice)
If we buy supplies like stationery or drinking water directly from the supplier/GST registered company, then we can claim the Input tax correct?
What are the common expenses that we can’t claim for input tax?
Input tax incurred can be claimed if the recipient is a registered person. The recipient must hold a valid tax invoice in respect of a supply of goods or services used for business purposes and attributable to taxable supplies made or to be made. There are two types of tax invoices i.e. simplified tax invoice and full tax invoice
A full tax invoice must be issued under the name of the registered person to be eligible for input tax credit. A tax invoice issued under the name of any person other than the registered person will not be eligible for input tax credit except for mobile phone bill expenses used for business purposes. A registered person can use the mobile phone bill expenses invoice billed to his employee for claiming input tax as long as the expenses are reimbursed and accounted as business expenses. The GST amount must be shown on the tax invoice; otherwise the registered person is not allowed to claim input tax using the tax invoice.
For simplified tax invoice, the maximum amount of input tax to be claimed is only RM30.
For more information, please refer to the Guide on Tax Invoice and Record Keeping.
GST cannot be claimed on goods and services which are not used for business purposes (e.g. for private use) and used or to be used for making an exempt supply. Where goods are used partly for business and partly for non-business purposes, the GST incurred is normally apportioned. In order to claim input tax, a registered person must hold proper documents.
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.
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.
If a registered person acquires the goods and services for non-business purposes, he is not eligible to claim input tax.
Generally, a taxable person is eligible to claim input tax which is attributable to the making of the following supplies:
(a) 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.
Taxable supply would also include a supply made to a class of persons who are given relief from paying GST. Any GST incurred on such supplies is claimable as input tax.
(b) inputs used for making taxable supplies outside Malaysia which would be taxable supplies if made in Malaysia;
Input tax incurred can be claimed in respect of the supplies made outside Malaysia which would be taxable supplies if made in Malaysia.
(c) Inputs used for making supplies made in certain prescribed circumstances
Generally, supplies made by financial institutions e.g. the provision of loans or financing is an exempt supply and input tax is not claimable.
However, banks and other financial institutions which provide loans or financing to businesses are allowed to use Fixed Input Tax Recovery (FITR) method to claim the GST incurred on their business input.
FITR is a method where a financial institution such as:
(a) commercial bank;
(b) investment bank;
(c) Islamic bank;
(d) development financial institutions and any other approved institution specified in the First Schedule of the GST Regulations 2014 is entitled to recover input tax based on a specific rate in percentage determined by the Minister. If a financial institution is allowed to recover input tax using the FITR method, the amount of the input tax allowable is in accordance with the following formula:
A x B
where: A is the total input tax incurred in the taxable period excluding input tax allowed on the acquisition of goods or services under Islamic financial arrangement
B is the fixed rate.
The total input tax incurred in the taxable period includes:
(a) input tax in relation to exempt supplies i.e. loans provided to businesses and individuals;
(b) input tax in relation to standard rated and zero rated supplies;
(c) input tax in relation to other exempt supplies e.g. investment activities.
Generally, a taxable person is entitled to claim GST on inputs attributable in making taxable supplies. The following persons are not entitled to claim input tax.
(a) a non-registered person
(b) a person making an exempt supply; and
(c) blocked input tax.