IMPORTANT ANNOUNCEMENT: Malaysian Tax Changes15/05/2018
SST Quick Facts18/05/2018
The government has announced – and made the necessary legal changes – to reduce the GST rate from 6% to 0% on all goods and services supplied effective June 1. In practical terms, this means that May 31 is the last day of GST in Malaysia.
With only 10 working days left, here are the 8 things businesses should do immediately:
- Make system changes immediately to ensure supplies made on or after June 1 are subject to zero GST. This may be as simple as applying a different tax code to the sales items or changing the tax rate for a particular to code, or may require sophisticated customisation – depending on the nature of business and its systems.
- Assess the short-term impact on demand and financial. Consumers may want to defer purchase of certain goods and services until June 1. Hence, businesses should relook into the financial budgets and operational schedules (such as production schedule) for the following weeks, and make the necessary revisions.
- Revise prices accordingly. The Finance Ministry’s media release states that businesses should comply with the Price Control and Anti-Profiteering Act 2011. The Act provides that it is an offence to make “unreasonably high profit” – as defined by regulations (which the minister may prescribe without going through the parliamentary process). The scope of the present regulation that prescribes the mechanism to determine “unreasonably high profit” is confined to household goods and food and beverages, but the scope may be easily expanded.
- Review existing contracts where prices were agreed inclusive of GST but the supply (wholly or partially) would be made on or after June 1. Section 67 of the GST Act provides for the contract value to be automatically varied, unless the contract expressly state otherwise.
- Expedite processing of tax invoices received from vendors. If there is any tax invoice yet to be posted in the payables system, swift processing of the tax invoice by May 31 would avoid any potential difficulty in claiming input tax credit thereafter.
- Expedite issuance of tax invoices for goods delivered or services performed until May 31. This will minimise transitional issues, and allow customers to claim input tax credit wherever applicable.
- Expedite issuance of credit notes. If you have already issued tax invoice for a supply but subsequently the value of the supply is required to be adjusted – for example due to goods returned, faulty service or early payment discount – it is advisable that the credit noted is issued by May 31 to avoid any potential uncertainty.
- Avoid receiving advances before June 1 for any goods that would be delivered or service that would be rendered on or after June 1.
Unwinding GST does not require as much effort as implementing GST but there are quite a bit of preparation to be made within the next 10 working days. Also, remember that the GST Act has not been repealed. As such, businesses must submit GST returns and make GST payments to Customs as per the usual due dates unless there’s further legislative change.
Thenesh Kannaa is author of Master GST Guide and a partner at TraTax, a firm of independent tax advisors.