IT is critical for businesses to properly understand the mechanics of the Goods and Services Tax (GST), given the wider implications on the economy and the well-being of the rakyat, said PricewaterhouseCoopers (PwC) Taxation Services Malaysia.
“Many of the uncertainties stem from a perception issue. Many companies still do not fully understand how the GST regime works,” said PwC Taxation Services Malaysia executive director Hanita Ahmad yesterday.
“They view it as a compliance exercise instead of a progressive tax that will benefit them as they move up the value chain in the long run.”
As the GST is a new tax, she hoped that the government would exercise discretion and not penalise businesses for unintended errors during the first two years of its implementation.
“Now is the time for the government to engage with businesses and find out where the challenges are and how they can work together to ensure the smooth implementation of the GST,” she noted.
The government recently gazetted amendments to the Price Control and Anti-Profiteering Act 2011 as a means to penalise businesses that make “unreasonably high profits” from GST collection.
While this is a positive first step to curb opportunistic price increases, it is necessary for the government to clearly articulate how this legislation can effectively address the needs of multiple stakeholders at every stage of the supply chain (from the supplier, manufacturer, distributor and retailer right to the end consumer).
Similarly, the mechanics of the proposed “Shopper’s Guide” should be clearly communicated in the months leading up to its implementation in January.
Hanita said the Customs Department had taken steps to provide guidelines and parameters to ease the transition to GST, but transitional issues need to be addressed.
“The key issues include identifying which products fall under the GST purview, how to avoid double taxation for stock that is on hand on March 31 next year, and how to treat products that were billed in advance.
“Businesses need to ensure that they charge the correct tax to goods and services. However, one of the key challenges is determining which products are six per cent and which products are zero-rated, for instance in the case of rice flour, which will have no GST imposed on it (zero-rated), while corn flour will be subject to a six per cent GST.
“To eliminate double taxation, the government has announced that sales tax will be returned for stock on hand as of March 31 next year. ”