Overview of Gst

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Overview of Malaysian GST by NK

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<ul><li><p> Technical Partner </p><p> Solution Partner </p><p>OVERVIEW of Goods and Services Tax </p><p>3/21/2014 </p></li><li><p>Why GST ? </p></li><li><p>Part of the governments tax reform programme to make it more efficient, effective, business friendly, transparent and capable of generating a more stable source of revenue </p><p> Effective (self-policing and overcomes inherent weaknesses of SST) </p><p> Efficient (less bureaucracy) </p><p> capable of generating a more stable source of revenue (not susceptible to economic downturn) </p><p> business friendly (lower cost) </p><p> Transparent (long-term benefit in terms of pricing) </p><p> Broader base give opportunity to reduce reliance on income tax </p><p> Everybody including foreigners, tourists will have to pay tax </p><p>Why GST? </p></li><li><p>What is GST ? </p></li><li><p>Business </p><p>Goods </p><p>Services </p><p>INPUT OUTPUT </p><p>GST on inputs </p><p> Input tax </p><p>GST on outputs </p><p> Output tax </p><p>Goods (Office </p><p>equipment, </p><p>stationary &amp; </p><p>other goods) </p><p>Services (rental </p><p>telephone, </p><p>insurance, </p><p>electricity etc) </p><p>What is GST? </p><p>Business PAY </p><p> Output Tax Less Input </p><p>Tax </p></li><li><p>VAT/GST IN ASEAN COUNTRIES </p><p>No threshold </p><p>Baht 1.8 mil </p><p>SGD 1 mil </p><p>Peso 1.5 mil </p><p>Lao Kip 400 mil </p><p>Riel 30 mil 125 mil </p><p>Rupiah 600 mil </p><p>Registration Threshold </p><p>(National Currency) </p><p> - 10 10 1999 Vietnam </p><p>59,000 10 7 1992 Thailand </p><p>782,000 7 3 1993 Singapore </p><p>34,000 12 10 1998 Philippines </p><p>49,000 10 10 2009 Laos </p><p>7,000 30,000 10 10 1999 Cambodia </p><p>68,000 10 10 1984 Indonesia </p><p>Registration Threshold </p><p>(USD) </p><p>Current Rate (%) </p><p>Initial Rate (%) </p><p>Year Country </p><p>Only Brunei, Malaysia and Myanmar have not implemented VAT/GST </p></li><li><p>PROPOSED GST </p><p>MODEL </p></li><li><p> Supply Output tax Input tax </p><p>Standard-rated </p><p>Zero-rated </p><p>Exempted </p><p>6% </p><p>0% </p><p>No GST charged </p><p>Claimable </p><p>Claimable </p><p>Not Claimable </p><p>Types of Supply </p></li><li><p> Agriculture products paddy &amp; fresh vegetables etc Beef , mutton, swine Fish, salted fish, prawns, crabs etc Rice,sugar, table salt, plain flour, cooking oil etc Selected poultry eggs First 200 unit of electricity domestic use Exported goods and services Selected services related to export </p><p>Zero Rated Items (summarised into broad categories) </p></li><li><p> Public transportation rail, bus, taxi etc Tolled highways or bridges Land for residential , agriculture or general use Funeral package services Private healthcare &amp; education Childcare services Selected accommodation services Selected supplies made by societies </p><p>Exempt Items (summarised into broad categories) </p></li><li><p>Other than </p><p>Zero Rated &amp; Exempt </p><p>Items </p><p>Standard Rated Items </p></li><li><p>Wholesaler </p><p>Price: RM50 GST: RM 3 </p><p>Tax remitted to Government </p><p>Output tax = RM 3.00 </p><p>Input Tax = RM 0 </p><p> RM3.00 </p><p>Total amount [1+ 2 +3] remitted to </p><p>Customs = RM 12.00 (paid by customer) </p><p>Retailer </p><p>Consumer </p><p>Price: RM100 GST: RM 6 </p><p>Price: RM200 GST: RM 12 </p><p>Output tax = RM 6.00 </p><p>Input tax = RM 3.00 </p><p> RM 3.00 </p><p>Output tax = RM 12,00 </p><p>Input tax = RM 6.00 </p><p> RM 6.00 </p><p>GST @ 6% </p><p>How GST Works for Standard-Rated </p><p>Consumer </p><p>pays </p><p>6% </p><p>GST only </p><p>Manufacturer </p><p>Assumption: GST 6 % </p><p>2 </p><p>1 </p><p>3 </p></li><li><p>GST </p><p>Issues &amp; </p><p>What to do ? </p></li><li><p>IMPACT </p><p>Supply Cost </p><p>Bad Debts </p><p>Invoicing </p><p>Contracts </p><p>Human Resource </p><p>Cash Flow </p></li><li><p>GST Implications on Supply Cost </p><p> Need to identify the existing suppliers </p><p> Will they be registered under GST </p><p> Need to talk to small suppliers to get them registered </p><p> Need to negotiate prices? WHY? </p><p> Impact on purchase cost ? </p><p> How to ensure that your suppliers pass on cost savings to you? </p><p> Pricing strategy will affect your competitiveness </p><p> Price control and anti-profiteering Act will come into force in 2011 </p></li><li><p>GST Implications on Cash Flow </p><p> Need to analyze cash flow impact on the business </p><p> Cash flow is minimized through credit invoicing method under the GST model ( but could still be an issue for many businesses) </p><p> Most imports would attract GST unlike the present sales tax. Need to look at your imports vs local purchases </p><p> GST payment could impact cash flow especially for large businesses who are on a monthly taxable period </p><p> Need to provide for one time fund to cater for GST payment upfront </p><p> Make use of group provisions (limitations?) </p><p> Export orientated businesses will have little output tax to offset input tax. ATS Eligibility? </p></li><li><p>GST Implications Bad debts </p><p> Bad debt relieve is available for payment not received within 6 months from the date of supply. </p><p> Need to monitor payment from customers </p><p> Ensure a proper matching of input &amp; output taxes </p><p> Ensure GST compliance by review of accounting / recording system </p><p> Bad debt claims need to understand evidence of reasonable efforts to recover the debt </p></li><li><p>GST Implications- Human Resource </p><p> Fringe benefits are taxable under GST </p><p> Need changes to the employment agreements? </p><p> How to introduce the changes </p><p> What are the risks? </p><p> Need to review policy on FBT liabilities, incentives, reward schemes </p></li><li><p>GST Implications Stock </p><p> Special refund is given on stock on hand </p><p> Full refund is given if you have documents showing sales tax has been paid but only 20% will be given if documents doesnt </p><p>show sales tax element. Need to review your purchasing policy? </p><p>What else? </p><p> Need to conduct stock take on the transition date. Audit certificate is required by customs. </p><p> Although special refund will be given, you may want to review your stock management policy to minimize cash flow impact. </p><p>Special refund will only be given in 8 instalments over a period </p><p>of two years. Economic order quantity may change due to </p><p>changes in the demand. </p></li><li><p>GST Implications Invoicing </p><p> To identify each type of supply whether standard rate, exempt, zero rate or out of scope. </p><p> Contract negotiation GST inclusive / exclusive price </p><p> Simplified tax invoice RM500, eligibility to claim is restricted to RM30 </p><p> Full tax invoice if necessary </p><p> Accounting system able to capture GST liability </p><p> 21 days rule </p></li><li><p>GST Implications Output Tax </p><p> Gifts more than &gt; RM500 attract GST liability </p><p> Gifts RM500 made in furtherance of business given to same person in the same year (No GST) </p><p> Commercial samples in a form not ordinarily available for sale to the public, no GST </p><p> Deemed supply attracts GST, eg, private use, disposal of business assets, etc. </p></li><li><p>GST Implications Input Tax </p><p> Not all business purchases are claimable </p><p> Blocked inputs are not claimable, is IT system and accounting system capable to differentiate. </p><p> ITC claim on sundry purchases from retail stores with a simplified tax invoice, is restricted to RM500 value only </p><p>(including the tax) </p><p> Claim of input tax for advance payments? </p><p> Apportionment of input tax </p></li><li><p>GST Implications Contracts </p><p> Legal advice with regards to contract (reviewable or non-reviewable) </p><p> Avoid long term contract without legal review </p><p> To absorb or not to absorb GST </p><p> How would competitors would react? </p><p> Pricing strategy? </p></li><li><p>System and Processes </p><p> Review system and processes. </p><p> Need to do a complete mapping of </p><p>transactions to identify changes that need to </p><p>be made </p><p> GST liability for every type of transaction </p><p> Advantage of online submissions to Customs </p><p> GST ready software or to develop own? </p></li><li><p>Registration &amp; </p><p>Compliance </p></li><li><p>Requirement to Register and Compliance </p><p> Any person who makes taxable supply of goods </p><p> and services in Malaysia </p><p> Registration is mandatory for businesses with turnover that has </p><p> exceed the prescribed threshold RM500,000 </p><p> Calculation of turnover for registration is based on the total </p><p> value of the taxable supplies for a 12 month period </p><p> If turnover RM5 million and above, monthly submission. </p><p> If turnover below RM5 million, quarterly submission. </p><p>Appointed Date (AD) 1 April 2015 </p><p>Mandatory to register 3 months prior to AD by 31 December 2014 </p><p>Failure to register by 31 Dec 14 will be considered committing an offence under </p><p>the proposed GST Act. </p></li><li><p>The determination of threshold </p><p>Taxable Turnover : </p><p>Includes Excludes </p><p> Standard Rated Supplies </p><p> Zero Rated Supplies </p><p> Deemed Supplies such as private </p><p> use, etc. </p><p> Exempt Supplies </p><p> Sale of capital Assets </p><p> Imported Services </p><p> Out of scope </p><p> Designated areas </p></li><li><p>Custom WEB portal www.gst.gov.my </p></li><li><p>GST READINESS </p><p> GST </p><p>Readiness </p><p>Human </p><p>Resource </p><p>Sales &amp; </p><p>Marketing </p><p>System </p><p>&amp; Processes </p><p>Accounting </p><p>&amp; Finance </p><p>Purchasing </p><p>&amp; supply chain </p><p>Government </p></li><li><p>Thank You </p><p>Audit Tax Advisory </p><p>D-3-4, Level 4, Setiawalk Persiaran Wawasan 47160, Puchong Selangor D.E. Malaysia Tel : +603 5882 2054 </p><p>www.nk.com.my Puchong : Ipoh : Sitiawan : Alor Setar </p><p>No. 90-1, Block 1, Biz Avenue 2 Neocyber Lingkaran Cyber Point Barat 63000 Cyberjaya Malaysia Tel : +603 8601 0698 </p><p>www.mysoft.com.my Cyberjaya : Maluri, KL </p></li></ul>

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