9.16 MS-Hire Purchase Transaction Using Margin Scheme

This is a transaction whereby a buyer of a car obtains financial assistance from a financial institution; the loan will form a substantial portion of the purchase price while the rest will be paid by the buyer. Usually, the buyer will place some

deposit before buying the goods. This means that the deposit may become part of the payment made for buying the goods.

In other words, the deposit is not refundable if it becomes part of the payment and hence it is subject to GST.

Scenario 1

The whole amount of output tax chargeable is RM283.00.

Since the down payment is greater than the margin, the whole amount of output tax has to be taken out from the down payment.

This output tax would need to be declared in GST return for the taxable period where down payment is received.

A normal invoice is issued to the financial institution.

Scenario 2

The whole amount of output tax chargeable is RM849.05.

Since the down payment is smaller than the margin, part of the amount of output tax has to be taken out from the down payment, i.e. RM566.03.

This amount would need to be declared first, in GST return of the taxable period which the down payment was received.

The remaining of the output tax will be taken out from the loan, i.e. RM283.02.

This amount would need to be declared in GST return for the taxable period where the loan is approved.

A normal invoice is issued to the financial institution.