So after multiple tests, reinstall, refresh, and snapshots.... I finally came to a conclusion (disclaimer: this is personal result, and not Microsoft official solution):
The GPO is working as intended, but it was intended for ProPlus (and above). For whatever reason unknown to us, Microsoft made Office 365 Business unable to pickup GPO (seem to be during installation).
Workaround: As stated in previous comment, you will need to install ProPlus (2013/2016 | 32bit/64bit), then sign in with an account with Office 365 Business subscriptions. Because Office detects that the sign in accord do not have ProPlus, you will still get "Activation required". To fix the activation required, hit Update Now, which will downgrade ProPlus to Business. The only differences we noticed is Business do not have Skype for Business, Access, and Publisher. The rest of the application still works, and GPO now work as we expected.
If you already have Office 365 Business installed, it is highly recommended to uninstall > restart first. Otherwise, the solution may not work.
Again, this is Not Microsoft official solution.
Recap: Uninstall O365 Business (if installed) > Restart > Install O365 ProPlus > signin with Business subscription > Update (to trigger downgrade from Pro to Business) > Profit!