KUCHING: Businesses have about two weeks to comply with the new update from the Ministry of Finance (MoF) to reduce the Goods and Services Tax (GST) from 6 per cent to 0 per cent beginning June 1, 2018 throughout the country, for goods and services within Malaysia and those imported from abroad.
Affin Hwang Investment Bank Bhd (AffinHwang Research) reiterated MOF’s note that all registered business entities have to comply with the GST rate adjustment to 0 per cent.
In the meantime, all registered businesses are still subject to all existing rules including those related to tax invoice, submission of tax return within predetermined taxable period, and claims of input tax credit.
“From our perspectives, the GST tax system remains in place, but by reducing the GST tax rate to 0 per cent, there will be zero GST incurred on inputs, therefore zero tax credit to the registrant (there will be zero offset against output tax),” it said in a note yesterday.
“In another word, the GST paid on goods and services used as intermediate inputs by GST registered businesses to make taxable supplies will be 0 per cent, where businesses are not required to claim input tax credits (ITC) as the GST tax they paid on their business inputs are also at 0 per cent.
“We believe the rationale for keeping the GST system active at 0 per cent is to ensure effective enforcement involving different tax collection agencies, namely Customs Department and the Inland Revenue Board (LHDN), to ensure registered businesses paid income tax, and to avoid taxpayer from non-compliance, like evasion and avoidance.
“Furthermore, businesses had invested and spent on changes in business processes, development of software and training of personnel for GST previously.”
Whilst the rakyat would be delighted with this news, GST registered businesses may face a challenging task to implement such change by June 1, highlighted Ng Sue Lynn, the executive tax director for Indirect Tax Practice at KPMG Malaysia.
“With only about 15 days to go, businesses need to consider various issues, some more complex than others,” she said in a statement yesterday, adding that among those thinge include reviewing the pricing of goods and services.
“The Ministry of Finance has reminded taxpayers on compliance with the Price Control and Anti Profiteering Act 2011. In other words, there is an expectation that reductions to the GST rate will flow through to consumers,” Ng said.
“They also need to carefully consider time of supply issues, both from an output tax and an input tax perspective as 1 June 2018 nears. There are specific rules on this and non-compliance is an offence.”
Meanwhile, businesses with advertised or displayed pricing will likely need to consider changing their displays with effect from June 1, 2018 so as to pass on the tax savings to customers.
Otherwise, apart from the anti-profiteering law, Ng said it might detrimentally impact on their market competitiveness.
She also said businesses need to relook the impact on existing and future contracts, IT system and assess its flexibility to abort GST functions (if required), and communication with staff, customers and suppliers.
“Apart from assessing the immediate change to the current business operations, companies should also start planning on how the change will affect their short term and long term business plans.
“Major business transactions may be impacted by this change which can then impact on cashflow. There must also be interim measures in place in the event a replacement law is enacted, in the near future.
“Changes are happening very quickly and businesses must adapt to remain compliant and competitive,” Ng concluded.