As you may be aware, the repeal of GST is one of the election manifestos of the new Government. Sales and Service Tax (SST) is mooted as the replacement. At this juncture, there is no indication as to when and how SST will be reintroduced.
On 16 May 2018, the Ministry of Finance (MoF) announced that the supply of goods and services in Malaysia will be subject to GST at 0% instead of 6% with effect from 1 June 2018.This change of tax rate applies also to GST levied on the importation of goods except for the supply of goods and services that are exempt under the Goods and Services Tax (Exempt Supply) Order 2014 and its related amendment orders.
Based on the information presently available, all other GST provisions will still be applicable. These include GST registration, the issuance of tax invoices, submission of GST returns and claims of input tax credit and bad debt relief. Businesses are also required to ensure that the prices of the goods and services supplied are in compliance with the Price Control and Anti-Profiteering Act 2011.
In view of the change in the GST tax rate and the possible reintroduction of SST, we would like to bring to your attention of the following matters to consider:
Accounting Issues to consider
Time of supply rules should be reviewed during the transition to zero-rate the supplies. The delivery of goods, any advance payment received and the issuance of tax invoices should be considered. GST should be charged in accordance with section 66 and 67 of GST Act 2014. (see FAQ on Change of Rate)
We do not anticipate the change of tax rate to zero-rate will require changes in the accounting systems. Present configurations should be able to accommodate the change. However, communications with your accounting software vendor is advisable to prepare the business for any potential changes that may be required in the future. For more information please see our FAQ on Change of Rate.
The Goods and Services Tax Act 2014 may still be repealed. In such an event, GST maynot be claimable as input tax credit after the repeal. Businesses are advised to review any GST yet to be claimed and to take the necessary actions to claim them as soon as possible.
New tax invoice formats may be required to reflect the changes if SST is reintroduced.
Other important issues to consider
Price displays should be changed to reflect the change in tax rate. These include price tags, food menus, advertisements, etc.
Applications awaiting approval from the Royal Malaysian Customs Department (RMCD) should be closely monitored. These include applications to claim GST incurred prior to registration.
Suppliers’ and customers’ contracts ought to be reviewed to identify any potential adverse impact arising from the zero-rating of GST and the potential reintroduction of SST.
Care and consideration as well as consultations with vendors and customers are strongly recommended to prevent any trade disputes for transactions occurring around the transitional period.
For more extensive information on the change of rate from 6% to 0%, please click on the link below for our FAQ.