GST SEMINAR: IMPLEMENTATION OF GST AND BUSINESS PREPARATION 1
Briefing Agenda 1. Supplies Spanning GST 2. Non Reviewable Contract 3. Special Refund 4. Registration 5. Business Preparation for GST 2
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Supplies Spanning GST Meaning of supply spanning GST payment or invoice before appointed date and supply takes place on and after appointed date e.g. sales of goods, airline tickets and cinema tickets General Rule any supply before appointed date not subject to GST any supply on or after appointed date subject to GST Exception to the general rule supply of warranty provision of services where service tax has been charged provision of goods where sales tax has been charged non reviewable contracts 4
Supplies Spanning GST General Rule: AD 1 st. April, 2015 (Appointed Date) No tax (GST) on:- a. Supply of goods, b. Supply of services c. Importation of goods 5
Supplies Spanning GST 1 st. scenario: Invoice issued AD 1 st. April, 2015 (Appointed Date) Goods supplied Payment received Services performed Value of supply [GST inclusive] Deemed:- Invoice issued or payment received on AD 6
Supplies Spanning GST 2 nd. scenario: Licensee under Sales Tax Act or Service Tax Act Licensee is a taxable person under GST Act Invoice issued AD 1 st. April, 2015 (Appointed Date) Goods supplied Payment received Services performed No GST chargeable on the supply of goods or services made on or after AD 7
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Non Reviewable Contract Non reviewable contract written contract with no provision to review the consideration for the supply until a review opportunity arises AND 24 months before the date of GST implementation { 1 st. April, 2015 } 9
Non Reviewable Contract Meaning of review opportunity Opportunity for supplier either by himself or with agreement to change the consideration because of the imposition of GST conduct a review after AD, renegotiation or alteration of consideration, or conduct a review before AD, renegotiation or alteration of the consideration 10
Non Reviewable Contract Zero rate supply for 5 years after appointed date or when a review opportunity arises whichever is the earlier if both supplier and recipient are registered persons; supply is a taxable supply; and the recipient of the supply is entitled to claim input tax on that supply After 5 years period, revert to either standard rate or zero rate 11
Non Reviewable Contract Zero rate supply for 5 years after appointed date or when a review opportunity arises whichever is the earlier AD 1 st. April, 2015 (Appointed Date) 5 years after AD 31 st. March, 2020 Review Opportunity Review Opportunity 12
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Registration Registration during the transitional period:- AD 1 st. April, 2015 (Appointed Date) Registration application 3 months before Registration effective on or from the appointed date 14
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Special Refund Entitle to special refund of sales tax if claimant is registered (mandatory) person hold goods on appointed date for making taxable supply goods are subject to sales tax hold relevant invoices or import document to show sales tax has been paid 16
Special Refund Goods not eligible for special refund capital goods e.g. building and land goods used partially or incorporated into other goods e.g. raw materials, work in progress goods for hire e.g. cars, generators goods not for business e.g. personal use goods not for sale or exchange e.g. containers, pellets, stationeries, moulds, manufacturing aids goods entitled to drawback goods allowed sales tax deduction under Section 31A Sales Tax Act 1972 (credit system) 17
Special Refund Manner to claim special refund claim within 6 months from appointed date for special refund < RM10,000 require audit certificate signed by a chartered accountant for special refund RM10,000 require audit certificate signed by an approved company auditor use special form to claim refund (online only) to be given in eight (8) equal installments over a period of two (2) years to account as output tax if special refund is claimed and goods are returned 18
Special Refund Reduce special refund to 20% (20% method) purchase goods from non licensed manufacturers goods are subject to sales tax holds invoices which does not show sales tax has been charged claimant is a registered (mandatory) person hold goods on appointed date for making taxable goods 19
Special Refund 20% method reduce the actual purchase price by 80% for goods held on hand on appointed date Special refund = actual price x 20% x sales tax rate Example: Holds RM10,000 of raw materials on appointed date Special refund = RM10,000 x 20% x 10% = RM200 20
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BUSINESS PREPARATION FOR GST Government System & Processes Human Resource GST Readiness Accounting & Finance Sales & Marketing Purchasing & supply chain 22
BUSINESS PREPARATION FOR GST GST Implication on System review system and processes perform complete mapping of transactions to identify required changes GST liability on every transaction and deadlines use of online submissions to tax agency computerised system ready made software upgrading present system 23
BUSINESS PREPARATION FOR GST GST Implication on the Repeal of Sales Tax and Service Tax Chargeability Facilities under the taxes repealed Taxable goods and services Non taxable goods and services Invoices issued and payment received before implementation date Invoices issued or payment received after implementation date Obligation to submit return and pay tax Invoice issued deemed inclusive of GST 24
BUSINESS PREPARATION FOR GST GST Implication on Registration can choose to be in the GST system are required to be in the GST system pre-registration registration exercise begins 6 months before date of GST implementation mandatory registration to register 3 months before date of GST implementation voluntary registration input tax consideration consumer profile 25
BUSINESS PREPARATION FOR GST Areas Pricing Policies Stock Management GST Implications Change in selling price to reflect GST replacing SST Negotiate with suppliers/vendors on prices of raw materials/trading stocks Input tax claimable Review procurement policy to avoid cascading effect To assess customers reaction on price Anti Profiteering Act will come in force Monitor business stocks (e.g. raw materials) - Special refund conduct stock take - Deregistration 26
BUSINESS PREPARATION FOR GST Areas Cash Flow GST Implications Need to analyze cash flow impact to assess the need to create a one time fund to cater for GST payment up-front cash maybe recovered from customer before GST is due Credit Terms Need to review credit terms and issuance of invoice timing differences may impact cash flow of business may result making payments of GST before collection from customers 27
BUSINESS PREPARATION FOR GST Areas Bad debts Advertising GST Implications Ensure a proper matching of payment of tax to government and payment received from customers Ensure GST compliance by reviewing the accounting / recording system Bad debt claims evidence of reasonable efforts to recover the debt Requirement to show price as GST inclusive 28
BUSINESS PREPARATION FOR GST Areas Invoicing GST Implications Identify type of each supply - Standard Rate, Zero Rate, exempt or out of scope Pricing GST inclusive / exclusive Simplified Tax invoice Full tax invoice necessary Accounting system able to capture and keep track GST in financial year Systems / software On line submission to Customs Department Enhance existing system 29
BUSINESS PREPARATION FOR GST Areas Staff Training Contract GST Implications To upgrade understanding of GST To avoid unnecessary mistake False/wrong information declared may open for audit case Monitor business stocks (e.g. raw materials) - Special refund - conduct stock take Computerised accounting system Legal advice with regards to contract Avoid long term contract without legal review 30
BUSINESS PREPARATION FOR GST General Comment from countries implemented GST / VAT on compliance: There are no major compliance problems. Taxpayers have generally been compliant and most of the errors uncovered stem from a lack of awareness of GST obligations or an inadequate understanding of GST rules. Wish List: 1. Both business community and Government are well -prepared to implement GST 2. Implementation problems are minimized 3. Minimum impact on prices of goods and services 4. Public accept GST implementation 31
End of Presentation Thank You GST Special Task Force Unit Royal Malaysian Customs Department 32