The Post Malaysian GST, An Insurer’s Nightmare? 

After the 1st April 2015’s GST implementation…. perhaps now is the time for the industry to reflect upon what’s next. What’s next is not difficult to guess. The Royal Custom & Excise department is certain to conduct a check if they have indeed missed out on collection gaps and insurers playing with loopholes and whats not. 

Perhaps it is time insurers conduct some sort of post GST health check on their accounts…. At least if there were indeed some misses, things can be rectified and resolved early before the eventual clampdown. 

Among the common issues raised by the auditor during one such post-GST health-check dialogue that I attended was that relating to GST treatment in Travel Personal Accident (TPA) policies.  

Looks like these professionals/experts (from the big 4s) too can have contradictory views with one another…. One of the experts interpreted directly from the national GST manual for Insurers and Takaful and the other from the industry (PIAM) GST handbook in which they were the party working with the industry in liaison with the Regulators. 

If we read the clause 18 of the PIAM GST Handbook.
18. If insurers issue a policy to cover the risks within and outside Malaysia and are unable to segregate them into respective categories, the whole policy will be subject to GST at standard rate. If an insurer is able to segregate the risks into risks within Malaysia and outside Malaysia, the risk outside Malaysia will be zero rated. For easy claims assessment in respect of eligibility to deemed input tax credit, insurers may issue separate policy for risks outside Malaysia.

“….meaning, in order for the TPA (overseas) policy to be zero rated it has to solely cover overseas itinerary and the local risks are in respect of going back home and no others, like staying overnight in another local destination is a no-no.” 
“If there is a dominant local itinerary risk then the TPA policy should be split into overseas and local trip; the latter is not entitled to zero rated. However if this cannot be separated then the whole policy shall fall as standard rated” 

Want to know more about Malaysia GST? GST NISSAN CROSSING 

On the other hand if we look into the National GST manual on application for Insurers and Takaful operators, we will get two notable clauses…. 
43. Where the supply of insurance coverage is from a point outside Malaysia (e.g. London) to a point inside Malaysia (e.g. Ipoh) in a single insurance contract, which covers both international and domestic movement of goods, the insurance coverage for the domestic movement of goods will also be zero-rated.
47. Examples of policies that qualify for zero rating include marine or aviation cargo insurance, marine/aviation hull insurance and travel insurance, etc. that is identifiable or involved with international journeys.

Let’s refer to consider 43 and 47….under the section on Insurance/Takaful on International Transportation of Goods and Passengers:

Here the regulator is seen allowing zero rated for TPA even if there is a significant part o7f the itinerary that’s local. Nevertheless the overseas itinerary must be dominant part of the policy. 

Notably, there are differences in opinion but I sort of would stick to the national version while to be cautious on what regulator may think and do if previous engagement experience are too be taken into consideration…. 

I stand here to be corrected so you guys do comment below….  

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