Malaysia's planned implementation of the Goods and Services Tax (GST) beginning April 1, 2015 is not expected to be a walk in the park. Major issue that the GST could lead to difficulties in quantifying companies' cost, and affect cash flow.
“The issues we face are similar to what has been faced in other countries. Our main problem is that we have adapted the GST systems used in other countries to suit us and, therefore, we have a long list of zero-rated and exempt goods and services.
"It creates issues, especially for suppliers who deal in both taxable and exempt supplies,” Dr Veerinderjeet Singh, chairman of Taxand Malaysia Sdn Bhd, was quoted as saying.
PCCC president Datuk Seri Choot Ewe Seng was quoted as saying the 6% GST could weigh on companies’ cash flow. This is because most businesses get their payments from customers between two and three months after the sales.
“When a company gets RM10,000 sales, it has to pay a GST of RM600, but the payment from the client only comes the following month. This will jeopardise cash flow,” Choot said.
Tax experts, however, said the impact on companies' cash flow depended on their tax classification and how quickly they can turn over their inventories.
Veerinderjeet said under the GST refund system, companies can claim a refund although customers have not paid for their purchases. This means GST-registered firms dealing in zero-rated and standard-rated goods can request for refund for input costs by the end of the month as long as they can produce the tax invoices.
“The GST refund system works on an accrual basis. Therefore, the input tax incurred on purchases can be claimed back against the output tax (if any) even though the purchases have not yet been paid for. This will assist in offsetting any cash flow effect on businesses, especially exporters,” Veerinderjeet was quoted as saying.
However, the term “tax exempt” could be a bit of a misnomer. This is because the term indicates that companies dealing in these goods will not be able to claim GST refunds on inputs. Input costs will effectively increase by about 6% and even if companies raise prices, they will have to actually sell the goods to recover the costs.
"Slow-moving inventories that are already contending with thin margins could be the hardest hit. Basic food items, certain financial services, healthcare, education and public transport are examples of exempt goods and services," the Edge Weekly said.
For more details about GST Training, GST Guidance, or GST Software, please contact Bifrost Tech Sdn Bhd at 04-6459769 / 04-6384789 or email to our support team at support@bifrostech.com or visit our website at http://www.bifrostech.com
“The issues we face are similar to what has been faced in other countries. Our main problem is that we have adapted the GST systems used in other countries to suit us and, therefore, we have a long list of zero-rated and exempt goods and services.
"It creates issues, especially for suppliers who deal in both taxable and exempt supplies,” Dr Veerinderjeet Singh, chairman of Taxand Malaysia Sdn Bhd, was quoted as saying.
PCCC president Datuk Seri Choot Ewe Seng was quoted as saying the 6% GST could weigh on companies’ cash flow. This is because most businesses get their payments from customers between two and three months after the sales.
“When a company gets RM10,000 sales, it has to pay a GST of RM600, but the payment from the client only comes the following month. This will jeopardise cash flow,” Choot said.
Tax experts, however, said the impact on companies' cash flow depended on their tax classification and how quickly they can turn over their inventories.
Veerinderjeet said under the GST refund system, companies can claim a refund although customers have not paid for their purchases. This means GST-registered firms dealing in zero-rated and standard-rated goods can request for refund for input costs by the end of the month as long as they can produce the tax invoices.
“The GST refund system works on an accrual basis. Therefore, the input tax incurred on purchases can be claimed back against the output tax (if any) even though the purchases have not yet been paid for. This will assist in offsetting any cash flow effect on businesses, especially exporters,” Veerinderjeet was quoted as saying.
However, the term “tax exempt” could be a bit of a misnomer. This is because the term indicates that companies dealing in these goods will not be able to claim GST refunds on inputs. Input costs will effectively increase by about 6% and even if companies raise prices, they will have to actually sell the goods to recover the costs.
"Slow-moving inventories that are already contending with thin margins could be the hardest hit. Basic food items, certain financial services, healthcare, education and public transport are examples of exempt goods and services," the Edge Weekly said.
For more details about GST Training, GST Guidance, or GST Software, please contact Bifrost Tech Sdn Bhd at 04-6459769 / 04-6384789 or email to our support team at support@bifrostech.com or visit our website at http://www.bifrostech.com
