1. OKP GROUP
ARE YOU READY FOR GST ?
Dennis Ooi
GST Advisor

2. |
Contents
▪ Why GST?
▪ What is GST?
▪ How GST affects you?
▪ Preparation for GST
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3. |
Most countries have implemented GST
(Source: Royal Malaysian Customs Department)
Region Number of countries
ASEAN 7
Asia 19
Europe 53
Oceania 7
Africa 44
South America 11
Caribbean, Central & North America 19
Total 160
GST/VA
T Countries 160
80%
20%
Non GST Countries - 41
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4. |
Countries implementing VAT/GST
Region/Country
Purchasing Power
Parity Per Capita*
(USD)
Year of
Implementation
Current Rate
(%)
Singapore 49,780 1993 7
Ireland 33,510 1973 21
Canada 37,410 1991 5
Australia 38,210 2000 10
United Kingdom 37,230 1973 20
France 33,930 1954 19.6
Japan 33,470 1989 5
New Zealand 27,870 1986 12.5
Malaysia 13,710 2015 6
Venezuela 12,220 1993 12
Kazakhstan 10,320 1992 12
Brazil 10,,200 1967 17
South Africa 10,050 1991 14
Thailand 7,640 1992 10
Sri Lanka 4,720 1998 12
Sudan 1,990 2000 15
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5. |
GST in ASEAN countries
Country Year Initial
Rate
(%)
Current
Rate (%)
Registration
Threshold
(National
Currency)
Registration
Threshold
(USD)
Indonesia 1984 10 10 Rupiah 600 mil 68,000
Cambodia 1999 10 10 Riel 30 mil – 125 mil 7,000 – 30,000
Laos 2009 10 10 Lao Kip 400 mil 49,000
Philippines 1998 10 12 Peso 1.5 mil 34,000
Singapore 1993 3 7 SGD 1 mil 782,000
Thailand 1992 7 10 Baht 1.8 mil 59,000
Vietnam 1999 10 10 No threshold -
Only Brunei, Malaysia and Myanmar have not implemented VAT/GST
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6. |
Why GST ?
• Part of the government’s tax reform programme to make it more efficient, effective,
business friendly, transparent and capable of generating a more stable source of
revenue
• Effective (self-policing and overcomes inherent weaknesses of SST)
• Efficient (less bureaucracy)
• Capable of generating a more stable source of revenue (not susceptible to
economic downturn)
• Business friendly (lower cost)
• Foreigners and tourists will have to pay tax on consumption
• Transparent (long-term benefit in terms of pricing)
• Hidden/shadow sectors/industries may be encouraged to be in the GST system
• GST on input is claimable
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7. |
30 Years Towards GST
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8. |
Contents
▪ Why GST?
▪ What is GST?
▪ How GST affects you?
▪ Preparation for GST
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9. |
What is GST ?
Basic principles of GST
• A consumption tax in the form of value added tax
 each stage of business transaction up to the retail stage of distribution
• Also known as Value Added T
ax (VAT)
• GST incurred on inputs is allowed as a credit to the registered person
 offset against output tax
SUPPLIER
Rent
Utilities
INPUTS
Raw materials
Goods
Services
OUTPUTS
GST on inputs
= Input tax
GST on outputs
= Output tax
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10. |
What is GST?
How GST works (standard – rate)
Manufacturer Wholesaler Retailer Consumer
GST is collected based on value added at each stage of supply chain
Business claims tax paid on input at each stage of supply chain
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11. |
What is GST?
Selling price : RM125
GST : RM7.50
Total selling price : RM132.50
Purchase cost : RM100
GST* : RM6
Purchase price : RM106
*Note: claim input tax credit
Delivery / supply chain
Manufacturer Wholesaler Retailer Consumer
Value-Adding
Activity
Added Value : RM25
(Add GST : RM1.50)
How GST works (standard – rate)
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12. |
What is GST?
Scope and Charge
• GST is charged on
 the taxable supply of goods and services
 made by a taxable person
 in the course or furtherance of business
 in Malaysia
• GST is charged on the imported goods/services
Sales Tax &
Service Tax (SST)
5, 6, 10% &
Specific rate
Goods &
Services Tax
(GST)
6%
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13. |
Types of supply
What is supply
A supply arises where:
Consideration is received
It is for something that is done
Taxable Supply
Standard-rated supply
GST rate 6%
Input tax is
recoverable
Zero-rated supply
GST rate 0%
Non-taxable Supply
Exempt supply
No GST
Generally, input
tax is not
recoverable
Out-of-scope
Not a supply
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Zero-rated supplies
• To provide complete relief from GST to the final consumers especially to the
lower income group
> agriculture products - paddy and fresh vegetables
> foodstuff - rice, sugar, table salt, plain flour, cooking oil
> livestock supplies - live animals and unprocessed (fresh or frozen) meat of
cattle, buffaloes, goat, sheep and swine
> poultry - live and unprocessed (fresh and frozen) meat of chicken and duck
> egg (fresh and salted)
> fish, prawn, cuttlefish, crabs, cockles
> supply of the first 200 units of electricity to domestic users
> supply of water to domestic users
• To make Malaysian products and services more competitive abroad
> exports of goods and services
> international services
What are the types of supply?
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15. |
What are the types of supply?
Exempt supplies
To reduce tax burden on the final consumers
> domestic transportation of passengers for mass public transport by rail
(KTM, LRT, ERL and Monorail), ships, boats, ferries, express bus, stage
bus, workers’ bus, school bus, feeder bus and taxi
> toll highway
> residential property
> land for agricultural purposes and land for burial purposes
> private health & education
Difficult to tax
> financial services
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What are the types of supply?
Out-of-scope supplies
Government services
• No GST on the supply of goods and services
> except certain services by government department (e.g. water
supply and advertising)
> statutory body and local authority in respect of its regulatory and
enforcement functions
• Acquisition by Government subject to GST unless
relief is given
Special Refund
• Refund of sales tax on goods held on hand upon GST implementation
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Standard Rated Supply
Raw Material
Supplier
Sale = RM100
Collect = RM106
Manufacturer
Sale = RM150
Collect = RM159
Manufacturer Wholesaler Retailer Consumer
GST AT 6%
Retailer
Sale = RM300
Collect = RM318
End Customer
Collected
= RM6
Paid to Govt
= RM6
Collected
= RM9
Claim back
= RM6
Paid to Govt
= RM3
Collected
= RM18
Claim back
= RM9
Paid to Govt
= RM9
Bears entire tax
burden from GST
= RM18
6% GST
RM6
6% GST 6% GST
RM9 RM18
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Zero Rated Supply
Raw Material
Supplier
Sale = RM100
Collect = RM106
Manufacturer
Sale = RM150
Collect = RM1150
Manufacturer Wholesaler Retailer Consumer
GST AT 0%
Retailer
Sale = RM300
Collect = RM300
End Customer
Collected
= RM6
Paid to Govt
= RM6
Claim back RM6
Do not pay any
GST
Do not pay any
GST
6% GST
RM6
0% GST 0% GST
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19. |
Exempt Supply
Supplier Private hospital Consumer
Consumer
does not
pay any
GST
GST AT 6% NO GST
Manufacturer
Sale = RM100
Collect =
RM106
Retailer
Sale = RM156
Collect =
RM156
Final
Customer
Collected
= RM6
Paid to Govt
= RM6
Cannot claim
back input tax
Do not pay
any GST
RM6
6% GST
No
GST
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20. |
Contents
▪ Why GST?
▪ What is GST?
▪ How GST affects you?
▪ Preparation for GST
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GST impact on consumers
Minimal Impact on CPI
• Reasons for minimal impact on CPI
> GST is replacing SST
> GST rate is lower than the current SST rate
> GST on input is claimable, GST is no longer a business cost
> Zero Rating on basic necessities
> Exemption on critical sectors
> High threshold ( >RM 500,000)
• Profiteering will be addressed through
> Price Control and Anti-Profiteering Act 2010, Price Monitoring Council, Ministry
of Domestic Trade, Co-operative and Consumerism
> communication strategy
> publicity campaign, GST Portal, call centre
> cooperation by Ministry of Information and Ministry of Tourism
> hypermarkets as price setters
> shoppers’ guide indicating potential decrease/ increase in prices of goods and
service
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GST impact on consumers
Issue Will GST increase the burden of the rakyat?
• GST will not burden the rakyat
> GST will replace the sales tax (5% & 10%) and service tax (6%)
which the rakyat is currently paying for
> GST will not be imposed on basic food and necessities
> RM300 one-off cash to BR1M recipients as household assistance
> Individual income tax rates reduced by 1% to 3% to increase their disposable
income - 300,000 tax payers will no longer pay tax
> Families of RM4,000 household income will no longer pay tax
> Chargeable income subject to the maximum rate of exceeding
RM100,000 will be increased to exceeding RM400,000. Current
maximum tax rate of 26% will be reduced to 24%, 24.5% and 25%
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GST impact on consumers
 Chargeable income subject to the maximum rate of exceeding RM100,000 will be
increased to exceeding RM400,000. Current maximum tax rate of 26% will be
reduced to 24%, 24.5% and 25%
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24. |
GST impact on SMEs
Issue High initial and compliance cost to the businesses after GST
implementation
• Threshold of RM500,000
 Small businesses will be excluded to be registered under GST
• Effective from YA 2016, company tax rate will be reduced by 1% from current 25% to
24%.
• Effective from YA 2016, company tax rate for SMEs will be reduced by 1% from current
20% to 19% for first RM500,000 taxable income, and reduced by 1% from current 25%
to 24% for taxable income exceeding RM500,000
• Secretarial fee and tax filing fee are allowed as tax deductions from 2015
• Cost of purchasing ICT equipment and software is given Accelerated Capital Allowance
until 2016
• Expenses for training in accounting and ICT relating to GST be given tax deduction for
2014 and 2015
• Financial assistance of RM150 million for purchasing accounting software to the SME in
2014 and 2015, RM1,000 evoucher for SME to buy software
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25. |
Contents
▪ Why GST?
▪ What is GST?
▪ How GST affects you?
▪ Preparation for GST
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26. |
Taking the Next Steps
Registering
your
Business
Filing Tax
Returns
Issuing Tax
Invoices
Accounting
for GST
Offences
Claiming GST
Refunds
Input Tax
Credit
Mechanism
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• Need to analyze cash flow impact
> Cash recover from customer before GST is due
> assess the need to provide for one time fund to cater for GST
payment upfront
> monthly taxable period
• Review credit terms to customers
• Review the requirement to apply for special schemes
• Ensure a proper matching of GST payment and payment received from
customers
• Monitor payment from customers
• Ensure GST compliance by reviewing of accounting and recording system
• Understand evidence of reasonable efforts
• Claim bad debts 6 months from date of supply
GST Implication on Cash Flow
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Output Tax
• Issuance of full and simplified tax invoice
• Issuance of credit and debit notes
• Not required to issue tax invoice for imported services and second hand goods
under margin scheme
• 21 days rule and Self billed invoice
• Gifts > RM500 subject to GST
• Commercial samples in a form not ordinarily available for sale to the public not
subject to GST
• Deemed supply eg, private use and disposal of business assets subject to GST
• Supplies to connected persons
Input Tax
• Input tax credit
• Apportionment of input tax
• Blocked inputs not claimable
• Incidental financial supplies
• Claim > RM500 to be supported by full tax invoice
• De Minimis rule
GST Implication on Sales and Expenses
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Legal Contract
• Legal advice with regards to non reviewable contract
• Avoid long term contract without legal review
• Absorption of GST
• Pricing strategy to pass on saving
Human Resources
• Upgrade staff understanding of GST
• Avoid unnecessary mistakes
• False information may open to audit case
• Use of computerize accounting system
• Review policy on fringe benefits
System and Process
• Review system and processes
• Perform complete mapping of transactions to identify required changes
• GST liability on every transaction
• Use of online submissions to tax agency
• Computerized system
• ready made software
• enhanced present system
GST Implication on Other Areas
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30. |
Preparing for GST
This widespread impact of GST on the entire organisation means that it will impact the competitiveness of
your business. The business issues that warrant attention are as illustrated:
• Impact on cash flow
• Identification of transaction and GST liability
• Maximisation of input tax credit
• Effect on demand
• Pricing strategies
• Impact on current contracts
• Registration & Compliance
• Cancellation of sales and service tax
licences– potential audit?
• End of sales tax facilities
• Preferential vendors under
GST
• Education and
communication
• Employee fringe benefits
policy
• Group structure review
• Systems changes for
GST compliance
Sales and
Marketing
Finance and
Administration
Procurement
Accountability Business
efficiency
Information
Technology
Goods & Services Tax
(GST)
Human Capital
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31. |
How We Can Assist You in GST Preparation
Phase 1: Planning and Impact Study (Duration: Nov 04 to Dec 04)
Objective
> Ensure proper project set up for the implementation
> Understand GST impact on business transactions
Scope
> Advice on resources required for the GST implementation project
> Conduct GST awareness training among internal stakeholders across the business
> Identify, analyse and prioritise issues to be addressed when GST is implemented using
customised tools and templates
> Develop high-level implementation plan, divided into individual work streams
Output
> GST impact study presentation kit
> GST implementation plan
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How We Can Assist You in GST Preparation
Objective
> Working together with your team to ensure that your company is GST compliant come 1st April 2015
Scope
> Refinement of detailed implementation plan to factor external changes
> Comment and develop strategies for the contracts spanning GST live date
> Advice on specific GST requirements on documentation
> Advice and provide suggestions on business policies and procedures impacted by GST
> Conduct education and training programme for employees
> Propose a communication programme with customers and suppliers
> Application for GST registration
> External communication with authorities to clarify on contentious issues
Output
> Completion checklist (GST manual)
> Overall IT systems ‘readiness’
> Review of first 2 monthly GST return
> Monitoring and follow through of GST implementation
Phase 2: Implementation and Technical Support (Duration: Jan 05 to Jun 05)
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33. |
THANK YOU
Dennis Ooi
GST Advisor
+6012 577 5595 (Whatsapp me)
okpgst@gmail.com
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