1. No category

GST – IMPLEMENTING
IT IN YOUR
BUSINESS
Ir.Aziz Ismail
GST – Impact To Your Business
Contents
1.0
Summary...................................................................................................................... 4
2.0
Starting Point ............................................................................................................... 5
3.0
Voluntary Registration – Competitive Strategy ........................................................... 8
4.0
Government Services – No GST ................................................................................. 10
5.0
GST Exempted ........................................................................................................... 11
6.0
ZERO RATED............................................................................................................... 13
7.0
INPUT TAX and OUTPUT TAX ..................................................................................... 15
8.0
What is OUTPUT TAX?. .............................................................................................. 16
9.0
VALUE ADDED TAX CONCEPT .................................................................................... 17
10.0
REGISTER AS GST COMPANY ..................................................................................... 18
11.0
e-Voucher from SME Corp ......................................................................................... 19
12.0
TAX INVOICE .............................................................................................................. 21
13.0
SUBMITTING GST-03 Form ........................................................................................ 21
14.0
TAX REFUND .............................................................................................................. 23
15.0
21-DAY RULE .............................................................................................................. 24
16.0
BAD DEBT WITH CUSTOMERS ................................................................................... 25
17.0
BAD DEBT WITH SUPPLIERS ....................................................................................... 25
18.0
GST-03 TAX RETURN .................................................................................................. 26
19.0
CLAIMING INPUT TAX ................................................................................................ 28
20.0
FULL TAX INVOICE...................................................................................................... 28
21.0
SIMPLIFIED TAX INVOICE ........................................................................................... 29
22.0
PRICE INCLUSIVE OF GST ........................................................................................... 30
23.0
BLOCKED INPUT TAX.................................................................................................. 31
24.0
SPECIAL NOTES: ZERO GST FOR EXPORT ................................................................... 32
25.0
SPECIAL NOTES: GST FOR IMPORT ............................................................................ 32
26.0
PRACTICAL ISSUES ON GST ........................................................................................ 34
27.0
REVIEW YOUR SUPPLIERS .......................................................................................... 34
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GST – Impact To Your Business
28.0
REVIEW YOUR SALES AND CONTRACT ...................................................................... 34
29.0
REVIEW YOUR CASH FLOW ........................................................................................ 35
30.0
REVIEW YOUR CREDIT TERMS ................................................................................... 35
31.0
IMPLICATION OF INVOICES........................................................................................ 35
32.0
IMPLICATION ON BAD DEBT (WITH YOUR CUSTOMERS) .......................................... 36
33.0
IMPLICATION OF BAD DEBT (WITH SUPPLIERS) ........................................................ 36
34.0
BLOCKED INPUT TAX.................................................................................................. 36
35.0
IMPLICATION ON OUTPUT TAX ( SAMPLES, GIFTS) ................................................... 37
36.0
IMPLICATION ON HUMAN RESOURCE....................................................................... 37
37.0
IMPLICATION ON ACCOUNTING SYSTEM .................................................................. 38
38.0
IMPLEMENTING OUTPUT TAX ................................................................................... 41
39.0
IMPLEMENTING INPUT TAX ....................................................................................... 43
40.0
GENERATING GST-03 TAX REPORT ............................................................................ 44
THE WRITER ........................................................................................................................... 49
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GST – Impact To Your Business
GST Introduction
1.0
Summary
In the last couple of months I have given short training to thousands of SMEs on the impact
of GST to their operation and what actions and precautions that they need to take in order
to operate their company after the start of GST on 1st April 2015.
This document is prepared after going through the experience of training thousands of
people like you, after analysing hundreds of their questions. It is written in simple
language, easy to understand. You can also refer to the original document published by
Jabatan Kastam in order to refer to legally worded documents, which could be quite
challenging to the normal people.
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GST – Impact To Your Business
This document is written as a simple to understand document. Along the way we will also
give the reference address for the document from Jabatan Kastam, if you want to refer to
the original source of the instruction or the act.
2.0
Starting Point
The GST will start from 1st April 2015. Basically all companies that are GST registered will
start implementing the GST instruction from that data. You also will be affected even
though you are not GST registered. Continue reading to know more.
The basic rule is if your company have sales of more than RM500,000 a year, you must
register as a GST company. You can use last year sales figure to help you here. The
registration is mandatory. No choice.
You must register by 31st December 2014. For those in Kelantan, Terengganu and Pahang
the date is 31 Jan 2015. This is due to effect of very bad flooding in those states. Recently
the Jabatan Kastam gave some leeway to those of you who are late. You can register latest
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GST – Impact To Your Business
by end of Feb 2015, without getting the fine. The “denda” is RM1,500 per 30 days late.
However those that failed to register by 28 Feb 2015, will be force registered by Jabatan
Kastam. The Jabatan Kastam issued a statement that those that are late even after this
time extension is liable to be fined for late registration for up to RM15,000.
Basically those companies who are registered as GST company must charge GST of 6%
after 1st April 2015. Of course you also need to read about GST Exempt and Zero Rated
GST to operate your company. We will talk about this in later chapters.
After 1st of April the previous taxes of Sales Tax and Service Tax will stop. The government
will stop the sales tax and service tax and start GST tax. I have a good idea why the GST will
be better that the Sales Tax and Service tax in terms of government collection. However I
will save this answer to when you ask the question later.
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GST – Impact To Your Business
So far we have more than 310,000 companies registered as GST company as of early Feb
2015. According to Jabatan Kastam, another 50,000 companies who have sales of more
than RM500,000 have not registered even by mid-Feb 2015. These are the companies that
will be force refgistered by Kastam later on. Probably with RM15,000 fine . Hope you are
not one of them.
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GST – Impact To Your Business
3.0
Voluntary Registration – Competitive Strategy
According to Jabatan Kastam, about 50,000 companies whose sales is less than RM500,000
also registered as GST company. You will be asking WHY DO THESE COMPANIES REGISTER
AS A GST COMPANY?. Why do they do this?
You can look at the following figure to help you understand their reasons to register. You
may want to register as GST company after understanding the impact to your business.
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GST – Impact To Your Business
Say that you are non GST company.Normally you are buying from SUPPLIER who is big,
therefore a GST company. For the sake of example, let say you purchase RM10,000 of
goods. Your supplier will charge you RM10,000 plus 6% GST which is RM600. So you pay
him RM10,600. You cannot claim the RM600 GST because you are not a GST company.
Now we look at your competitor. He is a GST company. For the sake of example let say he
will purchase from the same supplier. His supplier will charge him RM10,000 for the goods
plus RM600 for the 6% GST. So his cost is RM10,000. He can claim back the RM600 GST as
his INPUT TAX.
Now look at your customer point of view. I am assuming the customer is a big company,
thus GST registered company. If he buys from you he must pay you RM10,600. I am
assuming you take zero profit for the sake of this illustration. So his cost of RM10,600 if he
buys from you.
If he buys from your competitor, he will be charged RM10,000 plus RM600 for the GST. But
then he can claim the RM600 GST as his INPUT Tax. So his cost is only RM10,000 if he buys
from your competitor.
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GST – Impact To Your Business
If you are this customer, who will you buy from? Obviously you will buy from supplier with
lower price. Now you understand why 50,000 companies register as GST company even if
their sales is less than RM500,000 a year.
The message is if your customers are GST companies, large companies, GLC companies ,
government companies, you are less competitive if you are not a GST company. If you see
the logic in this explanation and your company is in this situation, please go and register as
GST company.
4.0
Government Services – No GST
I will spend some time here to explain about government services. In order to reduce the
burden to the people, the government have published that government services for the
people are not subject to GST. It could be government body or the local authorities or
Badan berkanun.
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I have added the figure up there to help you further. For example the government hospital
will not charge you GST. School fees and University fees are free from GST, your passport
fees, license and various permits are free from GST.
However it does not mean all government services are free from GST. If the government
body do commercial business, then they will charge the 6% GST to you.
5.0
GST Exempted
There are many goods and services that are exempted from GST. I have added a figure
below on this.
Basically the following will be exempted from GST:
1. Agriculture land (tanah pertanian), residential (land and building for residential)
and land for public use like cemetary or religious use or playground for the public .
No GST will be charged for this.
2. Financial Services. Any financial services, money transfer, life insurance, trust fund,
no GST will be charged. Thisinclude deposit, funding, loan, money transfer, bon
etc.
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3. Education. From pre school, primary school, secondary school up to University
education. No GST will be charged. The Jabatan Kastam is quite strict on this. The
exemption is for the activities that is core to the education. It include the fees,
including the hostel and food for the student, student transportation etc . But if
the activity is not core to the education like rental for convocation uniform, this
will be subject to GST. University may do some commercial business. This will be
subject to GST. Be aware that if you do private tution, you will charge GST. Private
tution is not GST exempted.
4. Healthcare Services ( Perkhidmatan Kesihatan). No GST is charged for health
services like hospital fees, dental services, ambulances, inspection, diagnosis, food
for patience, morgue etc. However medicine may have GST if they are not in the
list of medicine with Zero Rated list published by the Health Ministry.
5. Transportation Services. Rail, ferry, public buses, taxi are GST exempt. However car
rental is GST standard charge. If the ship is for tourist, then the GST is charged.
6. Toll. No GST for toll fees.
You will need to understand the difference between GST Exempt and Zero rated GST.
Basically GST exempt means that the customer is not charged GST. As for Zero Rated GST,
the customer is also not charged GST, because the GST is ZERO PERCENT. The only
difference is for Supplier. If he sells GST Exempt products or services, then he cannot claim
his input tax. If he sells ZERO RATED products or services, then he can claim his INPUT TAX.
As you can see from the figure above, the sallers of GST exempt products or services will
not charge GST for the product to their customers. They also cannot claim the GST input
tax that they have paid to their suppliers. So in this case they have to add to their prices
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the amount of GST that they have paid to their suppliers ( since they cannot claim back
from the government). Now the interesting question in your mind is what is the difference
to the final end user? Will they pay the same price whether it is GST exempt or GST
Standard rated? What will happen is the GST Exempt organisation will apply to the
government to be in GST Relief Order organisation. In this case they can get the certificate
of GST Relief Order from the government and ask their suppliers not to charge GST to them
in their supplies. A bit complicated but could work out well. We will see if this really will
work out as envisaged by the government after the implementation of the GST this year.
If you want to read more please go to this address
http://www.customs.gov.my/ms/pg/pg_odr/P.U.%20%28A%29%20271Perintah%20Cukai%20Barang%20dan%20Perkhidmatan%20%28Pembekalan%20Dikecualik
an%29.pdf
6.0
ZERO RATED
There are many products that are ZERO RATED. Basically the customer will pay ZERO GST
for these products. The good thing about ZERO rated is even though you do not charge GST
for the product or services that you sell, you can claim the INPUT TAX. In some cases like
EXPORTER, they may receive money every month from Kastam when their INPUT TAX is
more than OUTPUT Tax.
I have added the figure below to help you.
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Food. Many basic food are zero rated. Rice, flour, sugar, salt etc are zero rated.
Agriculture products. Rice, vegetable, fruit. Fresh or dried.
Animal for Food. Cow, chicken, sheep, egg etc
Seafood. Fresh or dried. Fish, crustacean, prawn, crab, lobster etc
Utility. Treated Water domestic.
Electricity. First 300 units domestic.
Coffee, tea, rempah, coconut, vegetable oil
Pasta, bread etc
Book, newspaper, brochures
Petrol RON95, Diesel, LPG
Export. You will see that when you export any products or services, you do not
need to add GST to the price. This will make your product more competitive.
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You will see that you can claim the INPUT TAX that you have paid to your suppliers for the
ZERO rated products. You charge ZERO PERCENT GST for the ZERO RATED products. Since
everybody in the supply chain can claim back all their INPUT TAX for these products, the
impact supposed to be ZERO increase in their prices. We will see if this really happened
after the GST is started this year.
A lot of information is in this page of Jabatan Kastam.
http://gst.customs.gov.my/en/rg/Pages/re_odr.aspx
7.0
INPUT TAX and OUTPUT TAX
What is INPUT TAX? Input tax is the tax that you paid when you purchase goods or services
for your business. Your business input could be your raw material, office rental, telephone
bill etc. All this INPUT TAX you can claim from Jabatan Kastam.
What you will do is create another account in your accounting system. In the chart of
account you will add GST Account. All the money that you paid for the GST ( called INPUT
TAX) will be recorded here. It behaves like a Debtor Account. You can claim from this
account.
For most of you the rule is very simple, any GST Tax ( INPUT TAX) that you paid, you can
claim from the government. Your claim is using the submission of The Tax Form GST03 to
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Kastam. However for some of you who are in the mixed supply category, you need to learn
a bit more on the rules. One of them is the you cannot claim GST Input Tax is you sell GST
Exempt supplies. If you are a property developer, you need to learn a bit more on
Apportionment of Input Tax.
8.0
What is OUTPUT TAX?.
When you are a GST company, all goods and services that you sell to your customers are
added the 6% GST. This 6% GST is called the OUTPUT TAX. Of course you have learned that
some goods or services are in the list of GST EXEMPT or ZERO RATED GST. You will need to
see the list of GST Exempt goods and services and GST ZERO RATED list. The simple rule is if
they are not GST EXEMPT and not in ZERO rated, they will be in the 6% GST ( called
Standard Rated)
For most of you the rule is very simple. After 1st of April 2015, you add GST of 6% to your
invoices. This 6% is not your money. You are collecting it on behalf of the government (
Jabatan Kastam). In your acccounting Chart of Account, you will add another account
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called GST Account. It is like a creditor account. You owe Jabatan Kastam the money
collected for the GST.
There are special rules in GST that you need to understand. Malaysian GST rule is a bit
more comlicated as compared to other countries with the GST Exempt, Zero Rated, GST
Blocked input Tax, Apportionment, Mixed supply, GST Relief Order and others. We will
touch this in another section.
9.0
VALUE ADDED TAX CONCEPT
You may have understood this correctly. I will just explain this section for those who need
further detail. Basically the rule is after GST started, the products will be be added a tax of
6%. The tax is only for the value added portion in the transaction stage.
For example when you purchase a product of RM30, you will pay a GST of RM1.80 ( which
is 6% of RM30). Say that after going through your company you sell it to your customer at
RM50 plus 6% GST which is RM3.0. Your customer will pay you RM53.00. You will pay the
government the net of [Output Tax – Input Tax] which is RM3.00 less RM1.80 which is
RM1.20. If you go through the whole supply chain, you will see at the end point, which is
the final consumer, the total tax being paid by the final consumer is 6% only.
The price will definitely go up for most of products. However if you notice in the first few
pages in this paper you will see that the Sales Tax and Service Tax is STOPPED as of 1st
April 2015. The sales tax is set at 10% at manufacturer level. So with this GST of 6%, we
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should see a price reduction due to the effect of reduced tax from 10% to 6%. We will see
if this really happen in Malaysia. People always complaint that the shops will icrease their
prices immediately whenever the price of petrol go up, but then when the price of petrol
go down, the price rarely go down accordingly. I believe the competitive situation will
force the shops to reduce their prices. Could free market handle this?
10.0 REGISTER AS GST COMPANY
By now most of you are already registered as a GST company. So I will spend only a short
time decribing it here.
What you will do is go to Jabatan Kastam website.
www.gst.customs.gov.my
I would recommend you to do online registration. Of course you can also do manual
registration. Normally for your business you need to have business registration number as
provided by SSM. However if you are of different category then you need to have the
required Identification as required by Kastam.
 Identity card number,
 passport number, if you are not a Malaysian citizen
 registration number given by the Registrar of Society
 identification number provided by various local authorities, professional or
statutory bodies
Please refer to this document if you want to read more about it.
http://gst.customs.gov.my/en/SiteAssets/doc/Registering%20for%20GST%20Amend%201.
pdf
You also need to know your MSCI Code. This is called Malaysia Standard Industrial
Classifications (MSIC) 2008 code.
Please refer any information regarding your industry code from http://msic.stats.gov.my
website
Your business is classified in 5 digit codes. If you are in ICT, probably your code is 62010 –
under Information and Communication – Computer Programming, Consultancy and related
activities – Computer Programming Activities. This code is also part of your GST03 report
later on for your input and output tax report.
If you are not familiar with MSIC codes you can contact me. There are more than thirty
pages of the codes and only a few MSIC codes are relevant to your company. You need to
key in the MSIC codes relevant to your company in the registration process.
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11.0 e-Voucher from SME Corp
By now almost all of you have either received your e-Voucher or you already know that
you are not getting it from SME Corp. The government had allocated RM150 millions for
the eVouchers. What the government did was allocate RM1,000 per company as eVoucher to help in purchasing the GST compliant acounting software. Based on this only
150,000 companies will get the eVoucher. So far more than 310,000 companies are already
regietered. So I believe the first 150,000 companies registered will get the eVoucher. The
late register companies will have missed the cut.
During the early part the SMEs need to apply to SME Corp for the eVoucher. They need to
upload quite a number of documents like Annual returns, EPF statement and other
documents. Many SMEs faced difficulties in this area and many complaints were written to
the government and SME Corp. Luckily they were quite open to suggestion based on
public feedback. Then the rules were changed where after 10th November, all companies
that registered for GST will be given automatically the the voucher. SME Corp received
many unpopular votes during the GST registration exercise such as making it difficult for
application for eVouchers, delay in paying back the software vendors, e-mails not received
by SMEs for the eVoucher, cancelling eVoucher when the SMEs did not receive the e-mails
etc. Probably the government need to be a little closer to the ground next time. Listen
more to the voice of the SMEs and make their operation more efficient and effective.
What the SMEs will do is use the e-Voucher as payment of the accounting system from the
companies approved by Kastam. More than 280 companies are approved by Kastam by
mid January 2015. For example if the price of the system is RM1,800 then by using
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eVoucher you only need to add RM800 to purchase the product. The software company
will claim the RM1,000 eVoucher from SME Corp.
This is how the eVoucher looks like. You just need to print the eVoucher that you received
from SME Corp via email and give it to the software vendor.
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Remember you also need to submit confirmation of installation and training form together
with the eVouchr before the company can claim the eVoucher from SME Corp. Do not
forget about this, otherwise your eVoucher cannot be claimed.
12.0 TAX INVOICE
Tax invoice is key to your GST implementation. Once you submitted your tax invoice to
your customers, the clock starts ticking for the payment of the OUTPUT TAX to the Kastam.
There are rules that you need to understand on this tax invoice. I will cover this in later
chapters.
Basically if you submitted the invoice, the calculation for the TAX DUE will start. If you have
cash payment business, then the OUTPUT TAX is calculated when the payment is received.
The date due is based on whichever is the earlier date, the invoice date or the payment
received date.
You have learned earlier that you can also claim the INPUT TAX from the government.
Once you received the TAX INVOICE from your suppliers, then you can claim the INPUT
TAX.
13.0 SUBMITTING GST-03 Form
You need to submit the GST-03 form every month or every three months depending on
your sales value. If your sales is more than RM5 millions a year, then you need to submit
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every month. If your sales is less than RM5 million a year, then your submission is every
three month.
If you see from the figure above, you can see my explanation. I have also added another
figure below to assist you understanding it. The law says that you must submit your GST03
Tax return not later than the last day of the month following the end of taxable period.
Yes, very long winded.
What it meant is as follows:
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If your sales is more than RM5.0 million a year, then you need to submit GST-03 form every
month. So for month of April 2015, you must submit latest by end of May 2015, which is
not later than 31st May. For month of May report , you must submit not later than 30th
June.
If your sales is less than RM5.0 millions, then your submission date is every three month. In
this example, your first submision will be for April-May-June 2015. According to the rule,
your submission must be done latest by end of July 2015. Basically you have 30 days after
the end of the period to submit your report. Yes, of course, you also must write your
cheque to pay the Kastam based on GST03 report. Basically OUTPUT TAX – INPUT TAX =
TAX that you must pay the Kastam. Attach your cheque together with your report.
14.0 TAX REFUND
You will get tax refund if your OUTPUT TAX that you collect on behalf of the government is
less than the INPUT TAX that you paid. Look at the figure in the previous page. In case of
REFUND, the government promise to pay you back within 14 working days, if you submit
electronically. If you submit manually the refund is within 30 working days. Let us see if the
government keep their promise on this.
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15.0 21-DAY RULE
This is a new rule that you must understand. What it says is you must issue your invoice
within 21 days after your delivery, measured by the Delivery Order date. You must not
delay the invoice.
See the figure below to help you understand this better.
What the rule says is if you submit your invoice within 21 days of your DO, then the invoice
date is the invoice date. But in case you delay the invoice date to beyond the 21 days, then
the DO date becomes your invoice date. This could be a time bomb because if you missed
this rule, you may miss the payment of the OUTPUT TAX during the period because of the
DO 21 day rule.
Say that your DO is on 11th April and you forgot to issue the invoice in April. Say you issue
the invoice in 15th May. You expect that the payment of tax will be due at the end of June
because this is the May transaction. However due to this 21 day rule, the effective date of
invoice is on 11th April, which means that this is April transaction, and the payment due is
latest by 31st May. Now you can see the impact if you issue the invoice on 1st May 2015.
Your payment due date is end of June 2015. One month cash flow is affected here. Of
course if your invoice is much leter, you will be in bigger trouble. Be careful with your DO
after this.
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16.0 BAD DEBT WITH CUSTOMERS
If you read the invoice rule you will realise that the payment of OUTPUT TAX is based on
INVOICE ISSUED. Which means that even though your customer have not paid you, your
payment to Kastam must be done when it is due.
The government have another rule that you must understand. It is called Bad Debt rule. If
your customer did not pay you within 6 months after your TAX INVOICE, you can claim
back the OUTPUT TAX from the government. Of course you should have kept records that
you have made the effort to recover the debt from your customers. You could send them
reminders or statement of account. Some form of evidence that you have made the effort
to recover the money owed to you.
The transaction is done in the accounting system under Dad Debt transaction. Of course
you also need to learn other related things like Bad Debt recovered transaction. This is
done when your customer decided to pay you after you have claimed back your output tax
from the government.
17.0 BAD DEBT WITH SUPPLIERS
This is the opposite side of the coin, between you and your suppliers. When your supplier
invoiced you, according to the rule, you can immediately claim the INPUT TAX, even before
you have paid them. This is good for your cash flow. CLAIM even before you pay.
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Let say you did not pay your supplier after 6 months. The Bad Debt rule will come into
effect. The rule says that if you did not pay your supplier after 6 months, you must pay
back the INPUT TAX claimed earlier to the government. The transaction is available in the
accounting system called BAD DEBT with Supplier.
18.0 GST-03 TAX RETURN
The GST-03 Tax Return is generated automatically by the accounting software. You only
need to print the GST-03 form at the required date. Like we mentioned earlier, you need to
submit the GST-03 every month if your sales is more than RM5.0 million a year, and for
others the submission is every three months.
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In the accounting system you only need to select the GST-03 Returnd based on the
submission period. The GST-03 form will have all the details of the business transactions of
GST taxes. You will have total INPUT TAX that you have paid, Total OUTPUT TAX that you
have collected and the classification of various GST tax codes from Exempt supplies, Zero
rated, Standard rated, Import, Bad debt etc.
You must submit this form to the Jabatan Kastam based on the due date rule.
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19.0 CLAIMING INPUT TAX
During every submission of GST-03 form you will claim the INPUT TAXES. Do not worry if
you missed certain claim for your INPUT TAX bacause you can still claim it within 6 years
after date of supply or date of importation. Make sure you have a good records of the
various invoices from your suppliers and your payment. Just be careful with the
documentation. When dealing with claiming money from the government you must be
aware of the documentation requirements. This is probably about the best time for you to
make your document filing tip top.
20.0 FULL TAX INVOICE
We have mentioned many times before on TAX INVOICE. The first type is called FULL TAX
INVOICE. Full Tax invoice is almost the same as your typical invoice except that you have
TAX INVOICE written on the invoice. You probably need to change your existing invoice to
cater for this. If your invoice is printed by printer on blank paper, this will be no issue. The
GST accounting system will ensure this rule is followed. In case you have your own pre
printed form, then you need to add the TAX INVOICE word on it. You also must have your
GST Number on the invoice. This is new. The rest are quite standard like your customer
name, Invoice number, Invoice date, Price and of course the GST Tax value.
The customer name must be the full correct name because your customer will use this TAX
INVOICE to claim his INPUT TAX.
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You will see the rule for calculating the GST if the price is inclusive of GST later on.
21.0 SIMPLIFIED TAX INVOICE
Simplified tax invoice is the standard receipt that you received from your supplier like at
the supermarket or from sundry suppliers for small purchases. Normally it will contain the
Supplier Company Name and the product and the purchase value. You do not even have
your company name as purchaser in the receipt.
The rule for SIMPLIFIED TAX INVOICE is that you can claim a maximum of RM30 per
receipt. Which means that if your receipt is more than RM500, the maximum GST claim is
still for the first RM500 purchase. In other words, imagine that you purchase something
from the supermarket for RM1,000 and you paid RM60 for the GST, the maximum that you
can claim is only RM30.
What you can do is advice your office boy or your purchasing person to change the
simplified tax invoice ( the receipt) to FULL TAX INVOICE when purchase value is more than
RM500. Normally the supermarket or the shop can convert their normal receipt to FULL
TAX INVOICE to help you able to claim the full INPUT TAX.
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22.0 PRICE INCLUSIVE OF GST
In cases that you receive invoice that is INCLUSIVE of GST, then you should use this fomula
to calculate the GST.
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Follow the rule to calculate the GST whenever the price is inclusive of GST. If you use an
accounting system you will choose the price as inclusive of GST. The system will do their
own calculation to calculate the GST portion.
23.0 BLOCKED INPUT TAX
The government have another rule that you must learn. The rule is called BLOCKED INPUT
TAX. In this case you cannot claim the INPUT TAX for these expenses.
The blocked input tax are:






Supply or importation of passenger car (including lease of passenger car)
Club subscription fee (recreational or sporting purposes)
Medical and personal accident insurance premium
Medical expenses (for example, wheel chair)
Family benefits for employees
Entertainment expenses except for employees and existing customers
Make sure you understand the rule and do not claim if it is blocked. You will notice that
you can still claim entertainment expenses GST if you spend on your staff and existing
customers. For passenger cars, your company directors cars, forget it. You cannot claim
INPUT TAX for them.
You can read more about it in the following kastam document at web address
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http://gst.customs.gov.my/en/rg/SiteAssets/specific_guides_pdf/Input%20tax%20guide%2
0050413%20-latest%20version%20with%20%20Cover.pdf
24.0 SPECIAL NOTES: ZERO GST FOR EXPORT
If you export your products or services, the GST is ZERO RATED. This will help you to be
more cometitive overseas. You can also claim ALL the INPUT TAXES that you have paid. In
some cases your INPUT TAXES may be more than OUTPUT TAXES, and the government will
pay you money every month. Look into this.
25.0 SPECIAL NOTES: GST FOR IMPORT
If you import Goods into Malaysia, then you need to pay GST at the Kastam entry point.
You will normally fill up Borang K1 and pay customs at the entry point. Do your transaction
in the accounting system for IMPORT of Goods.
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If you IMPORT SERVICES, then you need to follow another treatment. Of course the
services is not a physical goods that can be checked at customs point. You can declare the
SERVICES IMPORT in the system. The responsibility for INPUT TAX is now at the IMPORTER
side under the GST rule.
You can read the specific guide for Imports here:
http://gst.customs.gov.my/en/rg/SiteAssets/specific_guides_pdf/Revised/Guide%20on
%20Import%20-%20revised%20as%20at%204%20Nov%202013.pdf
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26.0 PRACTICAL ISSUES ON GST
This is a homework for you. When you come baclk to your office, please look at the items
listed above. Make some adjustment in your office so that you will be more ready for the
GST. Avoid trouble with GST implementation. We know that for the first 2 years there will
be many issues that need to be sorted out with Kastam. But better be ready than having to
deal with issues with Kastam.
27.0 REVIEW YOUR SUPPLIERS
Make sure you review your suppliers. If you purchase from GST registered suppliers you
can claim back the INPUT TAX. If they are not GST company, you cannot claim the INPUT
TAX.
I guess many of your major customers also reviewing their suppliers now. They will insist
that their suppliers to have GST registration. Otherwise they cannot claim the input tax.
28.0 REVIEW YOUR SALES AND CONTRACT
If you have contracts that extend beyond April 2015, you must look at the GST implication.
After 1st of April 2015, all your invoices must be added the 6% GST. Make sure your
customers accept this. Otherwise they will insist the the GST is included in your price. You
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may end up losing a lot of money. We know sometimes your net profit can be in the range
below 10%.
Send them the letter indicating that the 6% GST will be charged on all future invoices after
1st April 2015.
29.0 REVIEW YOUR CASH FLOW
Remember that you must pay the OUTPUT TAX to the government based on INVOICE
ISSUED. Which means that even though the customer have not paid you, your payment to
the government must be done. You may have some CASH FLOW issue during the first
period of the GST implementation. Do your excel spread sheet and look at your invoices
and expected cash flow from your customers. If you have some shortfall please do
something now. You can not really call Jabatan Kastam and ask for delay in payment due to
this.
Of course on the other hand, you can claim the INPUT TAX even though you have not paid
your SUPPLIERS. This will reduce your burden on paying your OUTPUT TAX. It is a good idea
to look at your simulation of cash flow and ensure you are OK when we start the GST
implementation.
30.0 REVIEW YOUR CREDIT TERMS
Before GST, you may be a bit relaxed in your credit terms. During GST time, you will pay
the Customs the OUTPUT TAX even though your customers have not paid you. You may
end up having major cash flow problem because of the TAX PAYMENT to the Customs.
Please look at the credit terms now.
31.0 IMPLICATION OF INVOICES
If previously you have been very relaxed on invoices, you may need to think twice now.
Once you issued your invoices, you cannot simply tear the invoice and print another one
with different prices. The problem here is your customer would have already input the
invoice details into their accounting system in their computer and the numbers have gone
into the GST-03 tax return form.
Now you need to start learning the proper things to do when doing some changes in the
invoice. You should start using the CREDIT NOTE transaction to reduce the price etc. You
know now that the TAX INVOICE issued is considerd the trigger point for you to pay
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OUTPUT TAX. Be careful when you issue your invoice. Probably you should be sure of the
payment before you issue the invoice now.
32.0 IMPLICATION ON BAD DEBT (WITH YOUR CUSTOMERS)
Bad debt have always be a pain for SMEs. Many business went bust because of non
payment of invoices rather than having no business. Now we have another issue. When
you issue your invoice, and your customer have not paid you, you still have cash going out
to the Kastam for the payment of OUTPUT TAX. Be very careful on this. This is DOUBLE
WHAMMY.
But then when your customer failed to pay you within 6 months, you have the right to
claim back the paid OUTPUT TAX from Kastam. Make use of this to soften the blow of cash
flow to your company. Of course it might be more prudent for your business to deal with
customers that pay on time. You think about it.
The transaction for Bad Debt with Customer is in the acounting system.
33.0 IMPLICATION OF BAD DEBT (WITH SUPPLIERS)
You may, for certain reasons delay your payment to your supplier. Be careful with the GST
rule. The rule says that if you delay payment to your supplier after 6 months, you must pay
back the INPUT TAX that you have claimed before. You know that you can immediately
claim the INPUT TAX once you received the invoice from your suppliers.
After 6 months, you must pay back the INPUT TAX claimed earlier to the Kastam. The
transaction process is available in the accounting system. Do not take lightly with this rule
because we are playing with money. The Kastam must return the OUTPUT TAX received
from your Supplier 6 months ago. So they must get back the money from you.
34.0 BLOCKED INPUT TAX
Please study the list of blocked INPUT TAX. Do not make the mistake of claiming INPUT TAX
for BLOCKED items. I have listed the blocked items in earlier chapter.
What will happen is the Accountant and the Administration staff need to be trained on the
blocked input tax. Do not claim GST for your boss’s car. Do not claim GST for
entertainment to prospective clients etc.
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However you must also read the rule carefully. You can claim for entertainment to staff.
You can claim for entertainment to existing customers etc. So whatever you can claim, you
must claim.
As for car, let say the car is totally 100% business car like the maintenance vehicle that is
purely for business function. You can claim GST for this vehicle.
35.0 IMPLICATION ON OUTPUT TAX ( SAMPLES, GIFTS)
You must read about this. The GST rule says that if you give GIFTS to your customer ( value
RM500 or more) than you must pay the GST for it even though you gave it for free. The
logic is when you purchase the gift you already already claimed the INPUT TAX via the
GST- 03 tax return. The government asked you to pay the GST so that you can zero out the
INPUT TAX that you have claimed earlier. So that the government will not lose money on
this transaction. In the accounting system you can use the transaction SALES (NO
REVENUE) transaction.
Be careful also with Samples. If your sample is exactly the same as the actual product that
you sell, you are liable to pay OUTPUT TAX for the samples. What you should do is to
make sure your sample is in diferent shape from the commercial product or make it in
smaller size, different from the real product. In this case you do not need to pay the output
tax.
36.0 IMPLICATION ON HUMAN RESOURCE
By now you must have realised that not only the CEO but many staff need to know about
the GST. Of course your accountant must know about GST. She will do the transactions on
GST for you. Your sales manager and sales team must know about GST due to the impact
of invoice, 21 day rule and EXEMPT or ZERO rated rule. Invoices must add the 6% GST. Your
office boy that purchases material from supermarket must know that if the purchase is
more than RM500 he must get FULL TAX INVOICE from the supermarket. Your purchasing
staff must know about GST invoiced received from suppliers, the impact of late payment
and bad debt.
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37.0 IMPLICATION ON ACCOUNTING SYSTEM
If you have not been using any accounting system, this is the right time for you to start
using now. Anyway you have no choice. You must use accounting system that is approved
by Kastam. The accounting system will register all transactions for INPUT TAX ( various
categories) and OUTPUT TAXES.
The thing is the system will also provide you with the GST Audit File. This will become
necessary whenever the Kastam department wants to check your company GST03
submission. What they will do is they will take the GST Audit file and run it in their
computers. Their computers will rebuild the GST03, and if your GST03 is the same as their
GST03, then you are OK. But if their GST03 is not the same as ypur submitted GST03, then
this will give them reason to look deeper into your transactions. It would be bad news if
you have modified your transactions illegally. Jabatan Kastam could easily check the
invoices from your suppliers. They can also check invoices that you issued to your
customers and compare with the invoices that they dig from your customers file.
Remember the TAX INVOICES have GST number of both parties and the INVOICE NUMBER
and the Invoice value and the GST value. The message is do not try doing something funny
in this GST era.
Our company produced OfficeCentral, one of the system approved by Kastam. Our
approach is totally different as compared to our traditional competitors. Traditionally they
will focus on supplying you an accounting system. Something to help you build your
account. A back end thing. We focus on the opposite. We believe the ICT system should
help you make make more money, should help you to increase your business, should help
your team to be more effective and efficient in running your business. We believe the
system should be the front thing, the OPERATING SYSTEM to run your business operation
successfully. That is why when you use OfficeCentral, you not only get the accounting
system, but you also get the HR system, Payroll system, Finance module, Purchasing
module, Inventory module as well as the CRM module. Basically you will use the system to
help you manage your company systematically. You can get accesss to your company data
from anywhere, using any device that is internet connected. Your staff can collaborate
using the same database. You are free to move anywhere and yet you are still connected
to your office. You are in control of your company wherever you are. In this very
competitive business world, we need instant data and must make decision fast based on
correct data. The time where you could go on doing successful business with data that is
outdated is long gone.
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Take this opportunity to use ICT as a tool to grow your business, instead of only as a back
end thing.
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IMPLEMENTING GST IN YOUR
COMPANY
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38.0 IMPLEMENTING OUTPUT TAX
From 1st of April 2015 you must issue Full Tax Invoice or Simplified tax Invoice to
your customers according to Customs GST rules. You have read the previous
section on the meaning and implication of output tax. In this section you are going
to learn in more detail on implementing it using an accounting software. We use
OfficeCentral as the software for the accounting and GST.
Choose the ISSUE INVOICE from the system:
Then you can fill up the details of the invoice as required The system is clever
enough to DEBIT the DEBTOR selected and CREDIT the REVENUE account. The
system is designed such that the non accountant can also do correct transactions in
the system.
You can also issue invoice from CRM module. We will cover this in another section.
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You must know the TAX CODES that you need to select. In most cases you will select
STANDARD RATED, which is 6%. I will go through the TAX CODE selection. The selection for
this is SR.
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However you need also to learn all the other codes that you may need to use in some
other cases.
If you are exporting goods, you will use the ZRE tax code. You know that the GST for
EXPORT is zero percent.
If you are selling ZERO RATED goods, you will use ZRL. You still remember the ZERO RATED
goods like the goods at supermarket like rice, vegetable, bread, chicken etc.
You will need to use this ADJ for OUTPUT TAX ADJUSTMENT
39.0 IMPLEMENTING INPUT TAX
When you purchase goods or services, you will be issued with TAX INVOICE by your
suppliers. You need to do the transaction in your system.
The system will ask you to select your SUPPLIER NAME and fill up the INVOICE DETAILS
including the line items in the invoice. The system is clever enough to CREDIT the
CREDITOR and DEBIT the EXPENSES account.
Select RECEIVE INVOICE from the EXPENSES or ACCOUNT PAYABLE menu.
You need yo understand the various TAX CODES for the INPUT TAX. Normally you will
choose STANDARD RATED, TX which is 6%.
However you also need to understand the various TAX CODES for your purchases so that
you will select the correct code for your transactions.
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I have also mentioned the importation of Goods, where you will use the IM tax code. You
know that you will need to pay the Customs via the Borang K1 at customs check point.
Another TAX CODE that you will use is the BL, the DISALLOWED INPUT TAX. You remember
about the BLOCKED INPUT TAX like the GST for your company car, medical for staff,
entertainment for prospect etc.
40.0 GENERATING GST-03 TAX REPORT
Once you hve done all the transactions, you are now ready to generate the GST-03 Tax
Return.
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You will select GST REPORT from the MENU.
Select GST-03 and get the report.
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If you need more details on the transactions, you can click the VIEW TRANSACTION and
you will get this display.
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You can even view the detailed invoices by clicking the link of INVOICES.
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THE WRITER
Ir.Aziz Ismail
CEO , Authentic Venture Sdn
Bhd
Vice President II, NEF
Coach Leader, myNEF
Biography
Ir.Aziz Ismail is very active member of ICT economic cluster in Malaysia. As the
(Past) President of TeAM ( Technopreneur Association of Malaysia) and Vice
President II NEF ( Bumiputera ICT Entrepreneur Association) he is deeply involved
in many strategies, activities and issues related to the industry. He is the (Past)
coordinator for Economic Initiatives and Coach under Majlis Perundingan Melayu
(MPM), a caucus of more than 250 Malay NGO in Malaysia. He is also a (Past)
Director of Majlis Tindakan Ekonomi Melayu, an umbrella organistion of 47
national NGOs with 500,000 entrepreneur members. He is also the founder of
TechnopreneurAsia. The TechnopreneurAsia initiative is a unique initiative where
entrepreneurs across Asia will work under one platform where they will collaborate
to assist each other to expand their business into the regional countries.
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He started as an engineer in Tenaga Nasional responsible for control system for
power plants. Later on he joined an American company called Honeywell as a
projec manager responsible for control system for oil and gas plants. He moved to
become a CEO of Foxboro, another American company in Malaysia focusing on
industrial automation for oil and gas sector. He was responsible for the sales growth
of more than 10 times during his time there. He decided to become a Technopreneur
in 2002.
At company level he developed many interesting solutions that is based on
Microsoft platform. Among the key products include OfficeCentral and
AssetCentral. The OfficeCentral is a cloud based products that is designed for
managing SMEs that include accounting, GST accounting, human resource
management , payroll, finance, purchasing, cloud POS and Customer Relationship
Management CRM. There are thusands of users of OfficeCentral in Malaysia. The
OficeCentral is the winner for NEF Awani Award for best solution for SME in
2013. The AssetCentral is a leading solution where he combined the cloud
technology and mobile technology in managing asset and facilities. AssetCentral
modules include asset management, maintenance management, property
management and PC management. He also created other products like TenderAsia
(Portal of Tenders and Quotations across Asia), eTrax ( monitoring what employees
do on their computers) and Assetrax (Tracking laptops).
His company is a MSC Status company,a Microsoft Silver Partner, SME Corp
1Innocert (AA) certified, MSC SCORE+ (4.0) and CMMI certified. The company
is also MyCC ( Common Criteria certified) and ISO9001 certified. Venture also one
of the TERAS company under Government Teraju initiative. The company is
growing more than 50% a year in the last couple of years and recently received
investment by the government under MTDC to help the company grow faster
regionally.
He is also very involved in the ICT community in Malaysia in terms of policy and
various activities and events. He is the (Past) President of TeAM, an association for
ICT, Biotech and Green technology technopreneurs. He is also the Vice President II
of NEF, an association of Bumiputera ICT entrepreneurs as well as (Past) Council
Member for National Innovation Council (NIC) chaired by YAB Prime Minister and
SME Innovation Council chaired by Y.Bhg Dato’ Hafsah CEO of SME Corp. and
member of National ICT Expert under MOSTI. He is also in RMK11 Focus group
for ICT under MDEC and MITI. Ir Aziz also active in national economic association
as a (Past) Director and Economic Cluster leader for Majlis Tindakan Ekonomi
Melayu (MTEM). He was involved in the creation of the NEF-Awani ICT award
that was launched by the YAB Prime Minister in March 2011. He is also the Local
Advisory Panel member for MSC Malaysia and the Chairman for Domestic Direct
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Investment. He is also the Chairman for Go Global initiative under TeAM, MDEC ,
NEF and myNEF.
At community level he used to be one of the MDEC Pre-seed Grant evaluation
committee, MDEC MGS Grant Committee (Past), Cradle Grant approval committee
(Past) , University Technology Petronas and UTEM industry advisory panel,
external examiner, judge in Malaysian IHL ICT competition, judge in Microsoft
Imagine cup competition and APICTA award in Malaysia and International level.
He coached and adviced thousands of entrepreneurs and inspiring entrepreneurs in
business ideas, business plan and initiating large business initiatives under ICT and
other economic clusters. He coordinate and coach many economic initiatives under
MITI-MPM where the GNI impact runs into billions of ringgit a year. He is also a
Professor for Entrepreneurship ( Adjunct) at University Utara Malaysia and also
Member of Majlis Kuliyyah in University Islam UIA.
He is a speaker in many ICT events under MDEC, TeAM, NEF, MPC, PIKOM,
MATRADE and many NGOs and universities. He is frequently invited in Astro
Awani, Bernama to talk on issues related to ICT sector. He is also frequently
featured in the national newspaper and the national TV station.
His passion is in developing strategy and various actions for helping Malaysian ICT
companies to go to global market. He is the leader for the initiative Go Global, the
initiative to help companies to expand to regional market. He hope that in the near
future many ICT companies can compete and win in many overseas countries. At
local level he is actively involved with SMEs in Malaysia in initiative to help them
grow by using ICT under the initiative ICT for Growth. The ICT For Growth
initiative gave him the platform to help thousands of entrepreneurs a year in his talk
series all over Malaysia. The latest initiative Entrepreneur Coaching Club under
New Entrepreneur Foundation (myNEF) gave him the opportunity to use his
experience and expertise to help fellow entrepreneurs to become more successful in
their business.
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