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GST Treatment for Hand-Carried Imports

As international businesses are growing and travelers are visiting different countries frequently, it is necessary for us to look into hand-carried imports mechanism. The focus of this article is to examine the various ways of hand-carried import scenarios.

Importation is applicable to everyone, regardless whether it is individual or business, GST registrant or not GST registrant.

Let’s discuss on the potential scenario for the hand-carried imports.

  1. It can be barter-trades for traders who exchange goods in overseas and bring back to Malaysia.
  2. It can be a business trip that brings in industrial sample or products from overseas for testing. Certain items may relief from payment of tax
  3. It can be a tourist who visits abroad and return to Malaysia with souvenir which is goods.

A traveler may obtain overseas GST/VAT refund upon departure from the country. This will become tax free items in the origin. When the traveler returns to Malaysia, the traveler will decide any goods that require customs declaration as dutiable items. There are green lane and red lane for the traveler to choose. Green lane means nothing to declare and not subject to GST. Red lane means goods to be dutiable and GST is applicable on importation. The traveler has to observe the notice by making correct decision. Wrong decision will make an offence and subject to heavy fines or jail terms.

If the hand-carried goods are not subject to GST and purchased from overseas non GST registrant, it is out of scope purchase and the traveler will not entitle any input tax credit. Overseas GST/VAT is part of expenses.

If the hand-carried goods are subject to GST, then the traveler is entitled with GST on importation as input tax credit. The traveler must get K1 form for the valuation of goods, Customs duties and GST on importation. The customs official receipt shall issue to the business name and address.

When the goods are claiming input tax credit, this will trigger gift rule if the goods are giving to the staff, customers, vendors, connected and non-connected persons without consideration. Gift rule will apply.

For the whole operation of hand-carried imports, please download the PDF document and click on the links of the diagrams.

Visual Map - GST for Hand-Carried Goods

Royal Malaysian Customs Notice

 

Attachments:
Download this file (GST for Hand-Carried Imports.pdf)GST Treatment for Hand-Carried Imports[Article]1247 kB

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GST System Changes