Non-GST Registered Individual: Is GST Chargeable When Making a Supply of Commercial Property?

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Goods and Services Tax (GST) is a multi-stage tax, which replaces the Government Sales Tax and the Service Tax. GST is charged on all taxable supplies of goods and services in Malaysia unless specifically exempted. GST is charged to a registered person who registered under the Goods and Services Tax Act 2014 when there are taxable supply of goods and services made to his customers.

Under the GST, supplies of land can be either in the form of goods or services. Any transaction of land involving the transfer of ownership of the land or the strata title or transfer of any interests under deed of assignment will be regarded as supply of goods and GST applies to such transaction unless specifically exempted from tax. The supply of taxable services includes lease, tenancy, easement, licence to occupy.

With regards to supplies of property or land, the GST Act only captures commercial, administrative and industrial property. Question then arises as to whether an individual, who is not a GST registered person, is required to pay GST when making a supply of his commercial property. The Decision 4, 2014 made by the Director General of the Royal Malaysian Customs (as amended with effect from 28 October 2015) provides more clarify on this point.

An individual who is not a GST registered person will be considered as carrying out business if he at any one time owns:

(a)  more than 2 commercial properties;
(b)  more than 1 acre of commercial land; or
(c)  owns a commercial property worth more than RM 2million at market price.

A person who falls within the above categories will need to be registered as a GST registered person if:

(a)  he has the intention to supply any of his commercial properties or commercial lands; and
(b)  the total value of such supply exceeds RM500,000 in a 12 months period.

In light of the Director General’s clarification, it would appear that an individual who makes a supply of two or less commercial property or a commercial land not larger than 1 acre, within a 12 months period, would not be treated as carrying out business even if such sale exceeds RM500,000, provided that the market of the commercial property or land is below RM2,000,000, which in turn also means that the actual sale cannot exceed RM2,000,000.

Separately, individuals should also take note that supply of any lease, tenancy, easement, licence to occupy or rent, and these supplies exceed RM 500,000 annually, shall also be deemed as carrying out business and supplying a taxable service.