GST on travel purchases

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Malaysians who shop overseas may have to pay a Goods and Services Tax (GST) on their purchases after the tax is implemented on April 1 next year. Items such as wearables, souvenirs, gifts and food products are subject to GST.

According to the Goods and Services Tax (Relief) Order 2014, Malaysians who go overseas for three days (72 hours) or more can enjoy a tax relief for purchases up to RM400. Any sum in excess of that will be subject to 6% tax. For example, a traveller who returns from a five-day trip to Hong Kong with purchases worth RM500 will have to pay 6% GST on RM100, or RM6. 

Purchases made overseas are subject to GST because the tax is based on local consumption, and not just purchases made locally. Thus, all goods brought into Malaysia are subject to 6% GST irrespective of whether they are brought in via shipment or hand-carried by travellers for their own use. 

Koong Lin Loong, chairman of the Associated Chinese Chambers of Commerce and Industry of Malaysia's (ACCCIM) SMEs and human resource development committee, says purchases made overseas should not be subject to GST unless they are used for trading purposes. "It would be a hassle for travellers to keep all their receipts to show the price of all the goods they bring in."

However, it is unclear how GST on such purchases will be enforced. Kong, who is a tax consultant, says enforcement should be similar to the current practices for sales tax and import duties, where customs officers perform spotchecks if they suspect travellers are bringing in goods that might exceed the relief granted.

Local travellers who buy goods at duty-free zones, such as Langkawi, Tioman and Labuan, may also have to pay GST if their purchases exceed RM500. 

According to GST (Relief) Order 2014, travellers to Labuan can enjoy a tax relief of up to RM500 if their visit to the island is not less than one day (24 hours). As for Langkawi or Tioman, travellers have to stay for at least two days (48 hours) to enjoy the tax relief. 

GST levied on purchases made overseas is not unusual. In Singapore, those who travel overseas for two days (48 hours) or more enjoy a tax relief for purchases up to S$600 (RM1,541), while those who are away from the country for less than 48 hours receive a tax relief for purchases up to S$150 (RM385).