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How GST affects e-commerce

GST is a general consumption tax, which is subject to a number of general principles. One of the principles is that it operates on a territorial basis. Another principle is that it must be neutral or in other words, it may not interfere with the commercial flow. 

In business to business (B2B) transactions, where the consumer is entitled to an input tax credit, GST cannot be regarded as an item of expenditure. The GST payable by the provider of goods or services will invariably be paid by the consumer (transferred), while GST paid previously will be returned. 

For consumers who are not entitled or only partially entitled to deduct input tax, GST is an item of expenditure for their business. The businesses experience GST as an item of expenditure because of the payment of GST on the basis of the reverse charge mechanism. This also applies to private individuals. 

** information from Royal Malaysian Customs Department

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