We Don’t Need The GST To Boost Revenue (24 December 2009)

Interesting points raised in the Star Newspaper (VIEWS section,  N53) on 24 December 2009 opposing the implementation of the Goods and Services Tax (GST) in Malaysia:-

We don’t need the GST to boost revenue

The additional RM1bil revenue said to be derived from the proposed GST is not enough to cover the shortfall in government revenue caused by the excessive budget deficit.

Are the Sales and Service Tax (SST) and excise and customs duties going to be abolished altogether? Will this also include the abolition of high taxes we have to pay when buying new cars, beer, cigarettes, etc?

Every year, Parliament passes billions of ringgit in the Budget. The most important question to be asked is, where does all this money go?

How is it accounted for? What about Petronas’ accounts? The rate of the GST at 4% is ridiculously lower than the present service tax of 5% and the sales tax of 10%!

In no time, the rate of the GST will have to be increased to more than 10%! Otherwise, it will be a loss for the Government. But the middle and lower income groups will definitely suffer more.

Here are my suggestions on how to increase revenue without the GST:

1. Reintroduce death estate duties. There are many millionaires and billionaires out there today.

2. Revert to the old system of assessment of files by income tax officers, which is more effective than the present system whereby all return forms are centralized and sorted out by a private contractor who is paid billions. What a waste here!

3. The present SST under the Customs Department should either be privatized or corporatized for more efficiency, besides weeding out inefficient officers and directors.

At present, how many good and efficient officers are there in the SST division? Good ones are “cold-storaged” or “framed”.

The transfer and pricing of officers in the SST division are determined by outside syndicates (which also includes some accounting, secretarial and management firms, part-time bookkeepers and accounting clerks, agents, and retired directors and other officers) in collaboration with some officers, bosses and directors.

These syndicates are so good to the extent of using politicians, FMM (Federation of Malaysian Manufacturers) and the anti-corruption agency (ACA/MACC) to “finish” off good and efficient officers who go by the book!

The commonly used “weapon” is that “the officers came to cause inconveniences because they wanted money, thereby jeopardizing their businesses and indirectly sabotaging the country’s economy”! Then these strict officers would be transferred out of the SST division immediately!

That is why there are still so many illegal manufacturers out there who are unlicensed and pay no taxes! How many billions in taxes are in arrears and have still to be collected?

What about the billions of ringgit in raw materials bought with exemptions from sales tax that have been abused all this while? Have they been investigated?

How many have been prosecuted for not having a license, not paying taxes, evading taxes, underpayment of taxes and not submitting the return forms? The same goes for the service tax.

In fact, a lot of sales tax manufacturers are saying that Customs officers (whom they collaborate with, including the directors) are very stupid and do not know how to work.

Yet, these very “stupid” officers laugh their way happily to the bank, profiteering through evading the payment of sales tax. Many own big luxury cars, houses and other property.

4. If Members of Parliament are sincerely concerned about the welfare of the rakyat, they must vote against the implementation of this GST.

5. Also, the absolute power of the Minister of Finance to remit or cancel the taxes (SST) should be abolished. All appeals can go only through the SST Tribunal or the High Court.

If this SST division were to be corporatized or privatized, and staffed with first-class personnel and bosses, the present revenue from SST can be increased by more than 500 times! This is no fairy tale!




News Report On Moves To Curb Abuse Of GST (24 December 2009)

Reported in the Star Newspaper (NATION section, N6) on the Government’s move to introduce measures to curb abuse of Goods and Services Tax (GST) that is to be implemented in Malaysia on 24 December 2009:-

Moves to curb abuse of GST



PUTRAJAYA: The Government will introduce a raft of measures to curb profiteering once the goods and services tax (GST) is implemented in mid-2011, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah.

He said the framework to monitor price movements would be similar to the 143 other countries that had implemented the GST or value-added tax since 1948.

“Among the measures to prevent indiscriminate price increases will be the formulation of an Anti-Profiteering Bill, to be tabled in Parliament next March by the Domestic Trade, Cooperatives and Consumerism Minstry,” he said at an editors’ briefing on the GST yesterday.

Husni said the Finance Minstry would also prepare a “shopping guide” of over 300 items to inform the public about the expected prices of these goods and services following the imposition of the GST.

He added that there would be swift enforcement and heavy penalties on businesses found guilty of profiteering or taking advantage of the implementation of the GST to hike prices.

Husni said other measures that would be used to prevent unjustified price increases included the setting up of a price monitoring council and the enforcement of financial reporting standards such as those under the Malaysian Accounting Standards Board.

These standards would be enforced by the Companies Commission of Malaysia and the Securities Commission.

As for the prices of basic goods, Husni said the hypermarkets would be the price setter. He said the GST would not affect wage earners negatively as certain basic goods and services would be exempted.”

A Good Article On Main Compliance Requirments Of GST In Malaysia (15 December 2009)

A very useful article I have read from Biznews section, New Straits Times, Saturday, December 12, 2009 on implementation of Goods and Services Tax (GST) in Malaysia:-

GST – main compliance requirements

By Chew Theam Hock and Tan Eng Yew

BASED on recent announcements, the Government has indicated that it plans to implement Goods and Services Tax (GST) effective from the last quarter of 2011. The GST, at an indicative rate of 4 per cent, is set to replace the current sales tax and service tax regime.

The introduction of GST will require businesses to comply with various requirements under the GST laws and regulations. This article sets out some of the main requirements as we move towards the GST implementation date.


GST is a consumption tax which is designed to tax the “private final consumption”. Generally, GST will be chargeable on a broad range of supply of goods and services (i.e. taxable supplies) consumed domestically. The basic principle is that GST is collected throughout the production and supply chain. Each business will charge GST on taxable supplies and where conditions are fulfilled, allowed to claim a credit on GST paid on inputs purchased. It should be noted that the credit is generally claimable on all purchases required to make the taxable supply.

Taxable supplies can either be standard rated or zero-rated. Standard rated supplies are subjected to a specific rate of tax, which has been indicated to be 4 per cent. Zero-rated supplies are supplies subject to GST at a rate of zero per cent. Paddy, rice, vegetables, livestock, exported goods and services are some of the supplies proposed to be zero-rated. All goods and services are taxable except those which are specified as exempt.

Where a supply is classified as exempt, GST is not charged on the supply. However, no input tax credit is claimable by the supplier. Some of the examples of supplies that are proposed to be exempted are financial services, sale or lease of residential properties, private health and education, domestic transportation of passengers, land for agricultural purposes and burial ground.


In order to charge GST and claim input tax credits, businesses have to be registered for GST purposes with the Royal Malaysian Customs (“Customs”). Registration will be compulsory for businesses where the annual sales turnover of its taxable supplies exceed the prescribed threshold. The liability to register is determined based on either taxable turnover of the current month and the preceding 11 months or taxable turnover of the current month and the next 11 months. Businesses whose annual sales turnover is below the prescribed threshold may apply for voluntary registration. The indicative threshold is RM500,000.

One of the reasons to voluntarily register for GST is to enable the business to claim the input tax credits. Businesses which fall below the threshold may also be compelled to be licensed by their business customers who wish to claim the credit on the supplies acquired. Once registered, the business registrant must remain in the system for at least 2 years. We understand from the Customs Public Consultative meeting that pre-registration will be allowed a few months before the GST implementation date.


A GST registered person making a taxable supply to a taxable person must provide a tax invoice within a stipulated period (indicated as 21 days) after supply is made.

The GST “tax invoice” has to contain certain information as required by the law. Some of the information which is normally required is listed below:-

(a)   The word ‘tax invoice’ in a prominent place;

(b)   The invoice serial number;

(c)    The date of issue of the invoice;

(d)   The name, address and GST identification number of the supplier;

(e)   The name and address of the person to whom the goods or services are supplied;

(f)     A description sufficient to identify the goods or services supplied;

(g)   For each description, the quantity of the goods or the extent of the services and the amount payable, excluding GST;

(h)   Any discount offered;

(i)     The total amount payable excluding tax, the rate of tax and the total tax chargeable shown as a separate amount;

(j)     The total amount payable including the total tax chargeable;

(k)    Any amount referred to in subparagraph (i) and (j), expressed in a currency, other than Malaysian currency, must also be expressed in Malaysian currency; and

(l)     If the goods or services supplied are exempt or zero rated, they must be separately identified in the invoice and the gross total amount payable on them must be separately stated.


Businesses will be required to furnish GST returns and pay GST to Customs no later than a month after each taxable period. A taxable period is a regular interval period where a taxable person is liable to account for GST. Taxable periods may be 1 month, 3 months or 6 months depending on the businesses’ annual turnover.

At the end of a taxable period, if taxable supplies are made, GST registered businesses will need to compare output tax it charges to the input tax it incurs. Where the output tax is more than the input tax, businesses will need to remit the difference in the tax return to Customs no later than the last day of the month after the taxable period. If the input tax claimed is more than the output tax, businesses may be entitled to a refund subject to certain conditions.

Where there is late submission, a mandatory penalty at the prevailing rate will be imposed on any unpaid amount.


To claim input tax credits, GST registrant business will need to have a valid tax invoice from the supplier of taxable supplies acquired. In addition, there are other conditions that need to be fulfilled by the GST registered business for the input tax credit claim. These include:

  • The claimant must be a taxable person;
  • Invoice (i.e. tax invoice) is issued under the name of the claimant; and
  • Goods and services acquired are not subject to any input tax restriction. These are acquisitions whereby even though GST is paid, no input tax credit is allowed. These include the purchase of passenger motorcar (including importation), club subscriptions fee, medical and personal accident insurance premiums, medical expenses, family benefits, entertainment expenses and others. It should be noted that no GST is chargeable on the subsequent supplies of these items.


All business and accounting records relating to GST would be required to be kept in Bahasa Malaysia or the English language for a period of 7 years. If proper records are not maintained, the Customs may insist in making an assessment of tax which may not be due if full information in examined.


GST is generally not meant to be a tax on businesses, it imposes certain compliance requirements on businesses to account and remit the tax to Government. In case of non-compliance, businesses may be subject to penalties. As such, businesses are encouraged to exercise due care in preparing themselves to be GST compliant. As the implementation date approaches, the Government is anticipated to provide various avenues to help businesses do just that and businesses should make full use of this assistance.

The writers are executive directors of KPMG Tax Services Sdn Bhd.”

An Article On How GST Affects Small and Medium Businesses (23 November 2009)

An article by KPMG Tax Services Sdn. Bhd. on how implementation of Goods and Services Tax (“GST”) would affect small and medium businesses:-

“The Star, Monday November 23, 2009

How GST affects small, medium businesses


Awareness of compliance requirements vital before it’s introduced

THE goods and services tax (GST), if implemented, will not only affect big businesses. The compliance requirements apply once a business achieves a certain prescribed annual sales turnover level. This registration threshold has not been announced.

However, it is worthwhile noting that the licensing threshold for sales tax and service tax, which GST will replace, currently ranges from RM100,000 to RM300,000. If this is any indication, GST registration will be an obligation for many smaller businesses. This is taking into account that GST will be imposed on practically all supplies of goods and services and at every stage of the supply chain.

Credit offset mechanism: In simple terms, businesses supplying taxable goods and services have to charge GST on supplies made (referred to as output tax). The GST paid on purchases (input tax), including capital equipment, supplies and materials can be offset against the output GST. This is referred to as the credit offset mechanism.

The net amount would have to be remitted to the Royal Malaysian Customs. Businesses that are largely export-oriented are likely to be in a refund position. To claim the credit offset, businesses are required to obtain and keep tax invoices from suppliers. While this may sound simple, the tracking, record keeping and reporting can be a challenge to many businesses.

Below are some thoughts for small and medium-scale enterprises (SMEs) as the Government ponders on the implementation of the GST, particularly the registration threshold.

Awareness of responsibilities: Notwithstanding the size of the business, the law imposes the same compliance obligations once the registration threshold is reached. Once the registration threshold is announced, affected businesses will need to follow closely the developments and to understand their responsibilities under the GST regime.

While the business is essentially just collecting and remitting GST for the Government, non-compliance will result in penalties on the business itself.

It is hoped that the Government would leverage off the experience from other countries that have successfully implemented GST and roll out comprehensive awareness programmes to help, in particular SMEs, prepare for the GST. These could include organising briefings at various locations, setting up small offices, kiosks, helpdesks and hotlines throughout the country.

Compliance cost: GST imposes additional compliance costs for businesses. These come in the form of additional work to account for the tax, tracking of the input taxes paid, undertaking reconciliations and filings of GST returns.

In addition, where a business pays cash or has short credit periods from its suppliers, this may result in the business needing extra finances to purchase supplies when GST is first introduced. This is a timing issue which should iron itself out over time as credits are claimed. In this respect, there have been requests that the tax return cycles for SMEs be extended to ease the cashflow burden under the GST regime.

Customer reactions: As often happens, customers react to news of discounts or price increases. It is generally anticipated that GST will result in a price hike on certain goods.

The level of increase depends partly on the rate of tax announced. Experiences in other countries have shown that customers generally go on a shopping spree shortly before the introduction of the tax, followed by a period of relative inactivity after the tax is introduced.

Anticipating this, it may be necessary to do some stock planning to cater for a pre-GST rush. This, however, has to be balanced by the fact that stock in hand when GST is introduced, may not be entitled to any input tax credit.

Purchase of business assets: Like customers, businesses should also plan their purchases during the GST transition period. This is because currently many goods (particularly capital goods) have an embedded sales tax in them which is not deductible or creditable.

On the other hand, buying the same goods by the business after GST would allow the business to claim a credit for the GST (which will replace sales tax). This is an advantage for the business and the effective cost of the goods would then be lower (other things remaining equal).

As a rule of thumb, while household consumers are likely to shop before GST is introduced, businesses which are GST registration candidates should perhaps delay purchases to a time when GST is effective. This does, however, require some assumption that prices will otherwise remain static.

To register or not to register: Some businesses will inevitably fall below the registration threshold. While it may appear a good thing that the business is not subject to the compliance burden of the tax, other factors need to be taken into consideration whether or not to register.

For one, unless the business is licensed, it would not be entitled to claim the input tax credits on purchases. This leads to input tax paid being a cost to the business (this may be a good thing from the customers’ perspective; GST is not imposed when they purchase the goods).

However, in a situation where the customers of the business are other GST registered businesses, the supplier may be obligated to license itself as it is likely that the customer would insist on buying from another registered person to enable him to claim the input tax credit.

Noting the additional burden that GST puts on SMEs, the Government could consider making concerted efforts in conducting education campaigns as well as addressing and deciding on compliance issues before the introduction of GST. Treatment of specific transitional issues needs to be announced upfront to facilitate a smooth transition to the GST regime.

The writers are executive directors of KPMG Tax Services Sdn Bhd.