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Kuala Lumpur, 26 March 2015 – The Goods and Services Tax (GST) will be implemented effective 1 April 2015. To help policyholders better understand how GST will impact their general insurance policies, the General Insurance Association of Malaysia has listed down some commonly asked questions explaining how GST implementation may affect their general insurance policies.
1.What is the Goods and Services Tax (GST)?
GST enforced under the Goods and Services Tax (GST) Act, 2014 will be replacing the Sales and Services Tax (SST). The current rate of GST imposed is 6%.
2.Who will come under the GST Act?
Anyone carrying out a business in Malaysia with an annual turnover of RM500,000 and above is required to be GST registered.
3.What is a GST Registered Person?
A person who is registered under the GST Act is known as a GST registered person. A GST registered person can charge GST on his supply of goods and services. All general insurance companies who are members of PIAM are GST registered persons.
4.How will I know if my policy is subject to GST?
Policyholders who currently hold valid insurance policies with member companies of PIAM and are subject to GST, have been notified of the GST implementation through a GST clause which has been incorporated in all general insurance renewal notices and policy schedules.
5.Will GST increase the cost of general insurance?
As all general insurance policies are subject to GST, there may be an increase in the cost of insurance for a non-registered GST person. However, if you are a GST registered person, you will be able to claim Input Tax Credit on the GST paid by you on your policy from the Royal Malaysian Customs Department (RMCD).
6.How will a policyholder be billed for the GST on his premium?
For the imposition of GST on a general insurance policy, your insurance company will issue you a tax invoice for the amount of premium to be charged and the appropriate GST on this premium. The GST registration number of the insurance company will appear on the tax invoice.
7.How will a policyholder be billed for the GST on his premium?
For the imposition of GST on a general insurance policy, your insurance company will issue you a tax invoice for the amount of premium to be charged and the appropriate GST on this premium. The GST registration number of the insurance company will appear on the tax invoice.
8.If my insurance policy is valid before and after the GST is implemented on 1/4/2015, how will my GST be calculated by an insurance company?
Your GST will be calculated on a pro-rated basis. As an illustration, for a policy effective from 1/7/2014 to 30/6/2015, the calculation of pro-rated GST/premium is as follows:-
Insurance Premium
12 months RM3,600
Period of Cover without GST
(* 9/12 X 3,600)
9 months RM2,700*
Period of Cover with GST
(* 3/12 X 3,600)
3 months
6% GST on 900
RM 900*RM 54
Total Premium payable with pro-rated GST
(*3,600 + 54)
RM3,654*
Your insurance company may issue a tax invoice to charge the pro-rated GST on the applicable insurance premium, and collect this subsequently from you when the GST is enforced.
9.Who will remit the GST on my insurance premium to the Customs?
It is the responsibility of the insurance company to collect the applicable GST and remit this to the RMCD within the stipulated time frame set by the Government. Therefore consumers are required to pay the GST promptly.
10.What happens if I do not wish to pay GST on my insurance policy?
Payment of GST is governed by the GST Act, 2014 and as a consumer you are duty bound to pay this tax.
11.Can I be exempted from GST if I renew my policy early which is due on 12 April 2015 and pay the premium before 1 April 2015?
If a policy is incepted on or after 1 April 2015, even if the renewal is done earlier, the policyholder will have to pay the full GST of 12 months on the annual premium. Your insurance company may collect this amount from you on or after 1 April 2015.
12.I understand that GST can only be charged by a GST registered person. What if I purchase my insurance cover from a general insurance agent who is not GST registered. Will I still have to pay GST on my premium?
All general insurance policies are subject to GST even if they are sold by a general insurance agent who is not a GST registered person. In this instance, consumers must understand that the supply is provided by the insurance company and the supply (insurance cover) is subject to GST. The general insurance agent is merely acting on behalf of the insurance company.
13.If I am a GST registered person, and I purchase my insurance cover and pay the GST, what is the benefit for me to be GST registered?
If a policyholder is GST registered, he can claim Input Tax Credit for the GST paid by him on his insurance premiums to the insurance company, subject to conditions set by the RMCD.
14.How will GST affect my insurance claim settlement?
With the implementation of GST, the settlement of claims will depend on whether or not the policyholder is GST registered. If the policyholder is GST registered and entitled to claim Input Tax Credit, an insurance company will exclude GST from the claim amount paid to the policyholder.
If the policyholder is not a GST registered person, the insurance company will pay the claim in full (including GST) up to the sum insured/limit of liability or other limits of insurance cover.
15.Who can I contact to get further clarification and information about the impact of GST on general insurance policies?
Please contact your registered general insurance agent, insurance company or direct your queries on GST to PIAM at the PIAM Information Centre (PIC) pic@piam.org.my or call 03 – 2274 7395 or 03 – 2274 7399.