9.14 MS-GST on Margin Scheme for 2nd Hand Goods & Services

GST on Margin Scheme (MS) means the difference between the selling price and purchase price (ie. initial purchase cost).

If there is any value being added to the eligible goods such as cost for repairing, this cost is part of the margin other than profit. In other words, the value added must be included in the selling price and not the purchase price.

1) Acquisition by GST Margin Scheme Registered Person :

Scenario 1:

Individual / Non-registered person (SELLER) ---> GST MS registered person (BUYER)

- No tax invoice issued - No input tax to claim

- No GST charged

A buyer who is a GST MS registered person can purchase goods from individual or non-registered person. No tax invoice is issued by the seller (i.e. GST is not chargeable on the sale). No input tax is to be claimed by the buyer.

The buyer will then have the choice of whether to apply the margin scheme or not when he sells the goods.

Scenario 2:

GST MS registered person (SELLER) ---> GST MS registered person (BUYER)

- No tax invoice - No input tax to claim

- GST charged on Margin Scheme

A buyer who is GST MS registered person can also purchase second hand motor vehicle from a GST MS registered person. No tax invoice is issued by the seller but GST is chargeable on the margin. No input tax to be claimed by the buyer although GST is imposed (but only on the margin).

The buyer will then have the choice whether he wants to apply the margin scheme or not when he sells the goods.

2) Transaction Using Margin Scheme (output tax) :

Scenario 3:

GST MS registered person (SELLER) ---> Individual/GST registered/GST MS registered/Non-registered person (BUYER)

- No tax invoice

- GST charged on Margin Scheme

When a GST MS registered person sells the motor vehicle using margin scheme to an individual, non-registered person, GST MS registered person or GST registered person he will issue a normal invoice and account for output tax based on the margin. The output tax is inclusive in the margin.

However,the buyer cannot claim the tax as his input tax credit.

3) GST MS Registered Person Using Normal Transactions (Output Tax) :

Scenario 4:

GST MS registered person (SELLER) ---> Individual/GST registered/GST MS registered/Non-registered person (BUYER)

- Tax invoice issued

- Output tax on actual price

When a GST MS registered person sells the motor vehicle to buyers using normal transaction, tax invoice has to be issued and output tax to be accounted based on the actual sale value.

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CALCULATION AND ACCOUNTING FOR OUTPUT TAX

Example 1:

Abby car dealer who is a GST MS registered person bought a used car from Chan second-hand car dealer, who is not a GST registered person, at a price of RM45,000. Abby then sells the used car to an individual, Mr. Pillai, for RM50,000 using the margin scheme.