Craig Charlton, Senior Vice President of Epicor's Asia Pacific Operations (pic) said that cloud-driven services would be the most efficient way to tackle the GST challenge for businesses in Malaysia:
The registration of the Goods and Services Tax (GST) has been the key highlight in 2014 for companies with an annual turnover of RM500,000 [US$142,931] as well as the Royal Malaysian Customs Department (Customs). While much has been done this year by the Customs to garner further registration for GST, it is expected that only 200,000 of 300,000 (66 percent) required companies will have registered by the 31st December 2014 deadline.
Though penalties may be imposed on GST-compliant businesses if they fail to register, many are still in a 'wait and see' stance. Based on insights from internal surveys and customer dialogue sessions, Epicor's GST team has derived and debunked three myths that might have caused the hesitance for registration amongst Malaysian business decision makers.
Firstly, some believe that the implementation of GST will be deferred at the last minute. The deferment for the deadline, however, as Prime Minister Datuk Seri Najib Tun Razak confirmed there would be 'no turning back' by the Malaysian government. The recently announced Budget 2015 also contains far too many allocations for GST and such a deferment would have an undoubted impact to the government's fiscal balance.
Secondly, some business owners believe they are already in a position to tackle GST with their current accounting framework and no early preparation is needed to ensure a smooth transition by April 1. This might be true to smaller businesses, which usually operate on fairly straightforward business transactions. However, medium sized companies or larger companies with turnover of about RM500,000 annually will have trouble being able to invoice their customers and record their purchases from creditors accurately. Non GST compliant accounting software is also not able to accurately assist businesses produce vital documents such as the GST Audit File (GAF) and GST-03 (Tax Filing) which must be available on demand and for its annual reporting.
Thirdly, some business owners believe that their tax professionals and accountants are the only ones who need to prepare for the implementation. This is untrue because the impact of GST implementation goes beyond the accounting and finance functions. To ensure a smooth operational transition come April 1, business owners must review, audit and adapt their business processes or face any unwanted legal ramifications or operational downtime that would result in penalties or loss of revenue.
With 2015, companies are fast approaching the day of reckoning on April 1. Businesses that register late will feel the pressure for GST readiness. Three months is a short amount of time for testing, training, and debugging new accounting systems and software, and we do foresee companies struggling to meet compliance. According to several sources, it was noted that the Customs unofficially announced during its seminars that leniency will be granted to businesses if 'unintentional' errors are made during the first two years of GST implementation. However, if Customs finds any intentional errors made to avoid compliance, audits will be done on businesses and if found guilty, they will be fined up to RM20,000 [US$5,713].
We do foresee that some companies will unfortunately face these 'unintentional errors' given the technical nature of GST. While Customs has focused on educating business owners this year, many of these 'hand-holding' seminars emphasise the importance of registration but are unable to advise what businesses should do after they have registered. In an interview with The Edge Malaysia, Koong Lin Loong, the national council member and chairman of SMEs in the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCIM), was quoted saying "The GST seminars by the Customs are too general, but you cannot blame them because their participants range from small. Medium and vary in industry. So, it won't be specific to your business".
We believe that it is paramount for businesses to ensure their internal finance executives and accountants receive specific training to their nature of business in order to be equipped to tackle GST. Alternatively, they could also seek the services of a tax consultant or attend talks organised by trade associations which are able to provide crucial perspective and technical clarity. Epicor has been collaborating with the Federation of Malaysian Manufacturers (FMM) to provide expert advice and assistance for businesses in a way which are related to their respective sectors.
Another area of concern is the impact of GST to smaller businesses who are heavily dependent on a healthy cash flow. While the government has outlined many tax-exempted and zero-rated goods, businesses are still required to pay the tax upfront and claim a refund/ rebate thereafter. During the period which the business is awaiting the refund, they need to ensure they are able to manage their finances effectively in order to maintain smooth business operations.
Lastly, it is expected to see an increase of market spend of about 13 percent in the information and communications (ICT) sector. The National ICT Association of Malaysia (PIKOM) mentioned that the increase is an upward revision from 10% forecasted earlier this year due to the implementation of GST, including investments on hardware infrastructure, software licenses, advisory services and GST-related training.