ROYAL MALAYSIAN CUSTOMS

GOODS AND SERVICES TAX

GUIDE
ON

FREE COMMERCIAL
ZONE

GUIDE ON FREE COMMERCIAL ZONE

As at 22 JULY 2014

CONTENTS
INTRODUCTION ....................................................................................................... 1
Overview of Goods and Services Tax (GST) ......................................................... 1
GENERAL OPERATIONS OF THE INDUSTRY ....................................................... 1
Free Commercial Zone .......................................................................................... 1
IMPLICATION OF GST ON FCZ .............................................................................. 2
GOODS OR SERVICES SUPPLIED WITHIN FCZ ................................................... 2
GOODS OR SERVICES SUPPLIED BETWEEN FCZ .............................................. 2
GOODS OR SERVICES IMPORTED OR SUPPLIED INTO FCZ ............................. 2
GOODS OR SERVICES SUPPLIED FROM FCZ ..................................................... 3
KEEPING RECORDS ............................................................................................... 4
DISPOSAL OF RAW MATERIALS, COMPONENTS, WASTAGE AND FINISHED
GOODS ..................................................................................................................... 5
MACHINES FOR REPAIR ........................................................................................ 5
FREQUENTLY ASKED QUESTIONS ...................................................................... 5
FEEDBACK AND COMMENTS ................................................................................ 9
FURTHER INFORMATION ..................................................................................... 10

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INTRODUCTION
1.

This industry guide is prepared to assist businesses in understanding matters

with regards to GST treatment on Free Commercial Zone (FCZ).

Overview of Goods and Services Tax (GST)
2.

Goods and Services Tax (GST) is a multi-stage tax on domestic consumption.

GST is charged on all taxable supplies of goods and services in Malaysia except
those specifically exempted. GST is also charged on importation of goods and
services into Malaysia.
3.

Payment of tax is made in stages by the intermediaries in the production and

distribution process. Although the tax would be paid throughout the production and
distribution chain, only the value added at each stage is taxed thus avoiding double
taxation.
4.

In Malaysia, a person who is registered under the Goods and Services Tax

Act 2014 is known as a registered person. A registered person is required to

charge GST (output tax) on his taxable supply of goods and services made to his
customers. He is allowed to claim back any GST incurred on his purchases (input
tax) which are inputs to his business. Therefore, the tax itself is not a cost to the
intermediaries and does not appear as an expense item in their financial statements.
GENERAL OPERATIONS OF THE INDUSTRY
Free Commercial Zone
5.

A Free Zone is an area gazetted by the Minister of Finance under the section

3(1) Free Zones Act, 1990 where commercial activities are carried out with minimal
customs control. Free Zone Authority is appointed by the Minister under Section 3(2)
of the Free Zones Act 1990 to administer, maintain and operate the zone.

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IMPLICATION OF GST ON FCZ

6.

Under Part XV of the GST Act 2014, FCZ is regarded as a place outside the

Principal Customs Area (PCA). The zones are located at ports and airports as well
as outside ports and airports. The free commercial zones which are located outside
ports/airports are those located at Stulang Laut, Johor Bahru, Bukit Kayu Hitam,
Kedah, Pengkalan Kubor and Rantau Panjang, Kelantan. Commercial activities such
as trading (excluding retail trade), break-bulking, grading, relabelling, repacking and
other value-added activities are allowed to be carried out in FCZ.
GOODS OR SERVICES SUPPLIED WITHIN FCZ
7.

Any supply of goods made within a FCZ is not subject to GST, unless the

Minister prescribed by order published in the Gazette. However, goods used or

consumed in the zone other than goods for the purpose of commercial and retail
trade activities will be subject to GST.
8.

GST is chargeable on the supply of services made within the zone

irrespective of whether the zone is located at ports/airports or outside ports/airports.

Generally the services are standard rated except for some services supplied in the
zone located at ports/airports which are listed under the Goods and Services Tax
(Zero Rated Supplies) Order 20XX. Such supply of services are zero rated.
GOODS OR SERVICES SUPPLIED BETWEEN FCZ
9.

Payment of GST on any supply of goods between free commercial zones is

suspended irrespective of whether the zones are located at ports/airports or outside

ports/airports. However, any supply of services made between the zones is subject
to GST.
GOODS OR SERVICES IMPORTED OR SUPPLIED INTO FCZ
10.

For the purpose of GST, GST on goods imported into a free commercial zone,

whether the zone is located at ports/airports or outside ports/airports, is not subject

to GST provided that they are for commercial or retail trade activities.
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11.

GST on movement of goods which are subject to a warehousing scheme into

the zone is suspended. This means that GST on movement of goods from a bonded
warehouse, inland clearance depot or duty free shop into the zone is suspended.
Similar treatment applies to goods transported from a designated area to the zone.
12.

Supply of imported services into the zone is standard rated. GST is also

chargeable on any supply of goods or services made from a principal customs area
(PCA) to a person operating in a free commercial zone.
13.

When goods are transported from a PCA to a FCZ for outright export to a

foreign country, declaration of the goods must be made in Customs No.2 form at the
exit point of the PCA. GST on such supply is zero rated. However, declaration of
goods transported from a bonded warehouse, duty free shop or inland clearance
depot (ICD) must be made in Customs No.8 form.
14.

When goods are supplied from a PCA to a FCZ to be deposited first in the

FCZ before being exported to a foreign country (not an outright export), GST is
applicable.
GOODS OR SERVICES SUPPLIED FROM FCZ
15.

Generally, goods supplied from FCZ to PCA are subject to GST on

importation. Thus, GST shall be payable together with customs duty, if any, upon all
goods released for home consumption. However, if a registered person in PCA has
an approval under Approved Trader Scheme (ATS), payment of GST on such supply
of goods is suspended. Payment of GST on supply of goods from a FCZ to a
designated area or to a warehouse under section 70 of the GST Act 2014 is also
suspended.
16.

Declaration of dutiable goods must be made in Customs No.1 form in FCZ.

Import duty, if any, and GST must be paid at the checkpoint in the FCZ. Declaration
of goods released from a FCZ to bonded warehouse or ICD must be made in
Customs No.8 form.
17.

Supplies of services provided to PCA from a service provider in FCZ are local

supplies. Thus, the services are subject to GST and output tax has to be accounted
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for in a tax invoice if the service provider is a registered person. Similar GST
treatment is accorded for services supplied by any person in FCZ to PCA or to a
warehouse under section 70 of the GST Act.
KEEPING RECORDS
18.

Every FCZ operator has to keep full and true up-to-date records regarding all

transactions which affect or may affect his liability to tax.

19.

Records and documents that must be kept in the National language or English

are as follows:
(a)

all records of all goods and services supplied by or to that taxable

person including tax invoices, invoices, receipts, debit and credit notes
and export declaration forms;

(b)

all records on importation of goods;

(c)

any other records may be required by the proper customs officer.

(d)

other businesses and accounting records to be kept if maintained by a

taxable person:

(e)

ledgers, cash books and journals and all other books of account;

(f)

financial statements;

(g)

documentary proof to support zero rate supply (including export

documentation);

(h)

particulars of any agents acting on your behalf and transactions

concluded through agents;

(i)

bank deposits slips and bank statements;

(j)

data in electronic form, including computer printouts;

(k)

accounting charts, access codes, program documentation and system

instruction manuals;

(l)

contracts/sales agreements.

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20.

Records must be properly filed and kept at the approved premise and made

available at any time to be audited by any Customs officers. Any records shall be
preserved for a period of 7 years from the latest date to which such records relate.
DISPOSAL OF RAW MATERIALS, COMPONENTS, WASTAGE AND FINISHED
GOODS
21.

Disposal of raw materials, components, wastage and finished goods must be

supervised by the officer from the Zone Authority (ZA) and ZA will issue a certificate
signed by the ZA officer and the owner of the goods.
22.

Wastage and scrap which have commercial value are subject to GST when it

is supplied to PCA by a taxable person in FCZ.

23.

Disposal of raw materials, components, wastage and finished goods done

outside the Zone, should obtain approval from the ZA and the DG and supervised by
the senior officer of Customs and witnessed by the owner.
MACHINES FOR REPAIR
24.

Machines from FCZ sent to overseas for repair must get approval from the ZA

using ZB form. If the movement of machine for repair overseas is through PCA,
transit procedure will apply. If the repair is done in PCA, a bank guarantee shall be
furnished as required by the DG and conditions under the Goods and Services Tax
(Relief) Order 20XX shall be complied with.
FREQUENTLY ASKED QUESTIONS
Goods or Services Supplied Within FCZ
Q1.

AB Sdn Bhd is a retailer registered under GST. The company is

operating in Stulang Laut free commercial zone. Does he have to charge
GST on his sale?

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A1.

He does not have to charge GST on his sale. The goods purchased by his
customer will trigger GST when the customer takes out the goods from the
zone.

Q2.

CD Hotel (registered person) is operating in Stulang Laut free

commercial zone. The hotel acquires goods from AB Sdn Bhd
(registered retailer in the zone) for provision of food and beverages by
his restaurant located in the hotel. What is the treatment of GST on the
provision of food and beverages by the hotel?

A2.

CD Hotel must charge GST on the provision of food and beverages because
such provision is a supply of services and this supply is standard rated when it
is supplied in a commercial zone located outside ports/airports.

Q3.

XX Sdn Bhd is a registered person under GST. This company is

operating in a free commercial zone at Kuala Lumpur International
Airport. The company has supplied his products to YY Trader who is
also operating in the zone. Is there any GST implication on the supply
that XX Sdn Bhd made to YY Trader?

A3.

The supply of goods is not subject to GST.

Q4.

GG Sdn Bhd is a company who provides space for rental in a free

commercial zone located at Kuala Lumpur International Airport. If GG
Sdn Bhd is a registered person under GST, does he have to charge GST
on the rental of spaces?

A4.

GG Sdn Bhd has to charge GST on the rental of spaces provide by him
because it is a supply of services which is standard rated under GST.

Q5.

Some of the services provided by an operator in FCZ located at

ports/airports are contracted out (outsource) to another operator in the
zone. What is the treatment of GST on such services?

A5.

Services provided within FCZ located at ports/airports are standard rated.

Thus, GST needs be charged on such services.

Goods or Services Supplied Between FCZ

Q6.

Is transportation of goods from a FCZ to another FCZ subject to GST?

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A6.

Transportation of goods from a FCZ to another FCZ is standard- rated. Thus,

GST is chargeable on the supply of services.

Q7.

Further to question in Q6, what document shall I produce for the

movement of goods from FCZ to another FCZ?

A7.

Movement of goods between FCZ without passing through PCA must be

covered by ZB form. ZB form must also be used when the goods has reached
the destination but Customs No.8 form must be used when the goods are
passing through PCA.

Goods or services imported or supplied into FCZ

Q8.

I am an operator in a free commercial zone at Tanjung Pelepas, Johor

Bahru. What is treatment of GST on goods that I import from overseas
into the zone?

A8.

Goods imported into a FCZ Tanjung Pelepas for commercial activities are not
subject to GST.

Q9.

What is the treatment of GST on services imported by a registered

person operating in FCZ located at Rantau Panjang?

A9.

GST is chargeable at a standard rate on imported services into a FCZ not only
located at any port or airport but also located outside port or airport.

Q10. As an operator in a FCZ outside ports/airports and registered under

GST, what is the GST treatment on goods that I purchased from a
registered person in PCA?
A10. If you purchase goods from a registered person in a PCA, the goods are
subject to GST. Thus, GST is chargeable on such supply. However, if the
goods are subject to a warehousing scheme, that is the goods are removed
from a bonded warehouse, duty free shop or inland clearance depot, then
GST is suspended.
Q11. What happens if I am an operator in a FCZ located at Port Klang and I
purchase goods from a person in PCA for export?

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A11. If you are operating in a FCZ at a port, your purchase of goods will be zero
rated for outright export, i.e. the consignee of the goods is an overseas
person.
Q12. I am an operator in a FCZ at Johor Port, Pasir Gudang, Johor. My
customer sent his goods for further processing to me. Is there any GST
liability when the goods are sent back to my customer?
A12. Goods sent to any person operating in a FCZ for further processing are not
subject to GST as there is no transfer of ownership. Similarly for goods that
are sent back from the zone after further processing. However, GST needs to
be charged on the workmanship (services performed) if you are GST
registered person.
Q13. What is the treatment of GST on services rendered from PCA into a FCZ
located at ports/airports and outside port//airport?
A13. Services rendered from PCA into a free commercial zone are standard rated
regardless of whether the zone is located at port, airport or outside
ports/airports.
Goods or Services Supplied From FCZ
Q14. I am an operator in a FCZ in Port Klang. What is the treatment of GST on
supplies of goods from my company to a person in PCA?
A14. All supplies of goods made by a person operating in a FCZ at ports/airports to
a person in PCA are deemed to be imported into the PCA and hence subject
to GST. Payment of GST must be made in Customs No.1 form at the customs
check point of the zone. However, if your customer has an approval under
ATS, GST can be suspended at the point of importation. Similar treatment
applies to any supply of goods made by a person operating in a FCZ outside
ports/airports to a person operating in PCA where GST is charged at standard
rate.
Q15. How about supply of goods made from a FCZ to a free industrial zone
(FIZ)? What is the implication of GST on such supply?

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A15. Any supply of goods made from a FCZ to FIZ are treated as ordinary local
sales and it is subject to GST. However, the person operating in a FIZ is
eligible to apply for ATS. In such a case, GST on supply of goods is
suspended if the person has an approval under ATS.
Q16. What is the GST treatment on products samples from FCZ?
A16. Industrial and trade samples are given GST relief under the Goods and
Services Tax (Relief) Order 20XX. Hence no GST is chargeable.
Q17. What is the GST treatment on the goods exported from a FCZ?
A17. Goods that are exported from a FCZ whether the zone is located at
ports/airports or outside ports/airports are zero rated.
Q18. How about services provided from a person operating in a FCZ to
overseas?
A18. Any services provided by a person operating in a FCZ located at ports/airports
or outside ports/airports to overseas is zero rated.
Responsibilities of the Free Zone Operator
Q19. As a GST registered person who carries out a business in a FCZ, do I
need to know more about other aspects of GST?
A19. The following guides may be of interest to you:
(a)

GST Registration

(b)

Guide On Import

(c)

Guide on Export

(d)

Free Industrial Zone

FEEDBACK AND COMMENTS

25.

Any feedback or comments will be greatly appreciated. Please email your

feedback or comments to Puan Teh Kheng Ean ([email protected]) or

Encik Mohammad Sabri Bin Saad ([email protected]).

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FURTHER INFORMATION
26.

Further information can be obtained from:

(a)

GST Website: www.gst.customs.gov.my

(b)

GST Tel: 03-88822111

(c)

Customs Call Centre:

Tel

: 03-78067200/ 1-300-888-500

Fax

: 03-78067599

E-mail

: [email protected]

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