Malaysian firms grappling with intricacies of GST

[KUALA LUMPUR] WITH only six months to go until Malaysia imposes a 6 per cent Goods & Services Tax (GST), companies are starting to come to grips with the changes required of them under the new tax paradigm.

All 460 seats in the Kuala Lumpur Convention Centre's Plenary Theatre were taken up at a "GST Expo & Conference 2014" session on Thursday, with participants busy taking notes on, for example, the effects of the tax on employee benefits, which was among the topics covered during the three-day event. Participant Ritchie Lim, a business development director for Asia in software solutions company MERP Technologies Sdn Bhd, said: "The talk was useful, but many things are still confusing."

Indeed, businesses and the authorities are expected to muddle through it - at least initially - when the GST takes effect in April next year.

Tax consultants say they are doing their best to advise their clients based on the information they have from other jurisdictions which have imposed GST, but still anticipate confusion, because Malaysia's tax regime is not a wholesale copy of any regime in place elsewhere.

For instance, it will have three duty-free islands - Langkawi, Tioman and Labuan - designated as areas where no GST would be imposed on supplies made between or within them. Some people anticipate this could muddy the waters further.

Tax advice has begun to cost more. Swamped with work and struggling to meet companies' demand for GST advice, tax specialists have jacked up their fees considerably.

A company secretary of a multinational corporation who did not want to be named said: "They are asking for double what they asked for earlier this year."

The company's board of directors had not acted then, so she is resigned to the company having to cough up more for tax advice. And because the government has "cried wolf" on the implementation of GST a few times in the past, few businesses took the April 2015 deadline seriously - until recent months.

Even now, only about 7,000 companies with annual turnover exceeding RM500,000, slightly more than 2 per cent of the 300,000 companies estimated to be included under the GST scheme, have registered with the Royal Malaysian Customs Department. And of the 7,000 who have done so, only a 10th have applied for the RM1,000 (S$390) subsidy offered by the government for an upgrade of their accounting software to make it GST-compliant.

Given the Malaysian penchant to do things at the last minute, the authorities are expecting a deluge of companies to sign up in the weeks leading up to the Dec 31 deadline for registration.

Everyone is keenly awaiting the unveiling of the complete list of goods and services and the tax category they fall under - whether they are to be subject to GST, exempted or zero-rated.

Developers have also expressed concerns about how GST would be enforced in properties in mixed developments, given that only residential units are to be GST-exempt. They are also of the view that affordable homes - those costing under RM400,000 - ought to be zero-rated rather than tax-exempt. Developers can claim GST on the cost of their building materials only if the homes they build are zero-rated when sold; if the homes are only tax-exempt, developers cannot claim for GST, and may thus pass the cost of this tax to home buyers.