Overview and GST Impact to businesses

Transcription

1 Overview and GST Impact to businesses VENUE : IMPIANA KLCC DATE : 18 NOVEMBER 2014 Co-organised by Ministry of International Trade and Industry (MITI) & Korean Chamber Of Commerce Malaysia (KOCHAM) Presenter: Mohammad Sabri Bin Saad Senior Assistant Director of Custom

2 Agenda Introduction Why GST? What is GST? GST- The Malaysian Model GST Impacts Conclusion

3 Introduction

4 A Replacement Tax To replace current consumption taxes Sales Tax & Service Tax (SST) 5%, 6%, 10% & specific rate Various threshold Goods and Services Tax (GST) Rate = 6 % Threshold = RM500,000 Chargeability GST is charged on goods and services Supplied in Malaysia or imported

5 Current consumption tax 1972 Year of Implementation 1975 Sales Tax Selected goods manufactured locally and imported Scope of tax Prescribed services Service tax RM100,000 Threshold 0 RM3 millions 5%, 10% & specific Rate of tax 6% & specific Manufacturer Wholesaler Retailer consumer Services provider Consumer Sales tax is imposed and collected at the manufacturer level Service Tax is imposed when services is performed 5

6 gst.customs.gov.my 38

7 Why GST?

8 Why GST? To restructure the nation's tax structure to be more efficient, effective, transparent, business-friendly and capable of generating a stable revenue source 8

9 Why GST? Weakness in SST Tax on Tax Transfer Pricing No Tax Relief On Exports GST more Effective & Efficient National Revenue Shadow Economy Self policing & Increase Tax Compliance Less red tape Transparent Reduce dependence on income tax % (2012) Reduce dependence on petroleum products % (2012) Come out and register under the GST Size in Malaysia is quite big (30%) Not only the locals have to pay tax Tourist and foreigner also have to pay GST 9

10 What is GST?

11 What is GST? A consumption tax in the form of value added tax each stage of business transaction up to the retail stage of distribution Also known as Value Added Tax (VAT) GST incurred on inputs is allowed as a credit to the registrant offset against output tax INPUT OUTPUT Raw materials, Rents, Electricity, Furniture, Professional services etc. GST on inputs = Input tax Business Claimed input tax Goods Services GST on outputs = Output tax 11

12 What is GST? Types of supply Output tax Input tax Standard-rated 6% Claimable Zero-rated 0% Claimable Exempted No GST charged Not claimable

13 How GST Works? 6% Manufacturer Claim back GST Wholesaler - Claim back GST Retailer - Claim back GST Consumer pays 6% GST only Zero-rated supply 0% Manufacturer Claim back GST Wholesaler - Claim back GST Retailer - Claim back GST No GST pay by consumer Exempt supply 6% GST Manufacturer Claim back GST Private Hospital Cannot claim back GST Private Hospital does not charge GST consumer does not pay any GST 13

14 GST The Malaysian Model

15 Malaysia s GST Model Zero rated Supply (0%) GST exempt supply Food Items Agricultural Products rice, flour & Sago and peas dhal sugar & salt cooking oil ( palm oil, coconut & peanut) spices and cencalok, budu, belacan Infant milk Bread Paddy fresh vegetables & salads All fruits Rail Bus Taxi / Car Rental Livestock & Meat cattle, sheep, buffalo, pigs poultry ( including eggs of poultry ) Seafood all types of seafood including dry fish & anchovy Toll Water Transportation Land(General) Utility water supply (domestic) The first 300 units of electricity (domestic) Export Exported goods and services education / Health Residential financial institutions Medication Several categories of drugs zero rated (2900 drugs and medicines under National Essential Medicines are zero rated) Bersatu Membangun Bersama 15

16 GST The Malaysian Model Budget Goods which are subject to GST at zero rate: White and wholemeal bread Prescribed Medicine Coffee powder, tea dust, cocoa powder Yellow mee, kuey teow, laksa and meehon Printed matters : Newspaper, reference books, text books, exercise and work books, religious text etc Goods which are not subject to GST: Petrol (RON 95), diesel, LPG

17 GST The Malaysian Model Government services No GST on the supply of goods and services made by Federal and State Government except certain services by government department e.g. water supply and advertising statutory body and local authority in respect of its regulatory and enforcement functions out of scope

18 GST The Malaysian Model Special schemes to provide cash flow relief to businesses to avoid double taxation to promote tourism

19 GST Impact

20 GST Impact Overcome weakness SST GST Cascading Eliminated No Complete Tax Relief On Export Export is zero rated and eligible to claim input tax credit Transfer pricing GST can overcome Transfer pricing problem in every supply chain 20

21 GST Impact CPI Impact on Consumer Price Index (CPI) Territory CPI Penisular Malaysia 1.20 % Sabah 1.02 % Sarawak 1.03 % Average 1.08 % 21

22 GST Impact on Business Business becomes more competitive GST on input is claimable GST is no longer a business cost Exports becomes more competitive No element of tax embedded Unlike SST, GST is self-policing, less human intervention with the authorities 22

23 GST Impact on Business Cash flow GST claimable even though payment has not been made invoice credit method No matching between input and output all purchases and acquisition are readily claimable Special schemes/rules ATS, ATMS, AJS, FRS, warehousing, margin scheme, group registration Bad debt provision Automatic offset if no payment received after 6 months from date of supply 23

24 Special Schemes Facilities for manufacturing activities: Approved Trader Scheme (ATS) facility given to major exporters where GST on imports is suspended Approved Toll Manufacturer Scheme (ATMS) facility given to local toll manufacturer to disregard tax on value added charges to overseas client Warehousing Scheme GST suspended in public and private warehouse Approved Jewellers Scheme (AJS) GST suspended on gold and precious metal acquired by jewellery manufacturers

25 GST Impact on Business Reduce cost of doing business for businesses especially the export oriented companies - LMW and FIZ Sales Tax Importation of goods Raw materials and machineries directly used - sales tax exemption. Goods which are indirectly used for business e.g stationeries, tires and office equipment are subject to tax. Locally acquired goods from licensed manufacturers are not subject to Sales Tax. However, If is acquired from the traders, the purchase price would be embedded with the element of sales tax. GST GST is suspended on importation of raw materials and machineries directly/indirectly used in manufacturing (ATS). Locally acquisition of goods are subject to GST. GST on inputs are claimable. 25

26 GST Impact on Business Start-up cost Not a major concern for many businesses because of the high threshold business to install new or upgrade computer system, staff training, accounting system and book keeping For SME free accounting software may be given by government Tax incentive compliance cost Many businesses are already registered under the SST Web based system to facilitate filing of returns at no cost Special advisory unit especially for SMEs Free seminars,training and dialogues Industry guides 26

27 Budget GST Assistance Package Business Reduction of corporate income tax rate by 1% from 25% to 24% Reduction of corporate income tax rate for SME s from 20% to 19% Reduction of co-operative income tax by 1% to 2% from 20% to 19% Income tax deduction for secretarial fee and tax filling fee: secretarial fee up to RM5,000 tax filling fee up to RM10,000 27

28 Budget GST Assistance Package Business Accelerated Capital Allowance on expenses for purchase of ICT equipment and software Further deduction on expenses related to training on accounting software and ICT RM1000 cash assistance for the purchase of accounting software for SME s Training grant for Income tax deduction for secretarial fee and tax filling fee: 28

29 GST Impact on economy Goods and services produced in Malaysia will become more competitive Exports and international services are zerorated Attract more tourists to visit and shop in Malaysia Tourist refund scheme At international airports Duty Free Zone -Labuan, Langkawi and Tioman -no GST Computable General Equilibrium Model (CGE) GST will boost GDP to 0.3 % export (0.5%) 29

30 SUMMARY Structural defects in the current tax system making Malaysia less competitive and in need of urgent Reform. GST will make pricing mechanism in Malaysia very transparent and would benefit consumers in the long run as GST could help to curb excessive profiteering. GST is a prerequisite to make Malaysia a High Income Nation Efficiency of GST would boost the Government Revenue and help to plug leakages.

31 Thank you

32 Comments, Clarifications and Suggestions i) Ketua Setiausaha, Perbendaharaan Malaysia Bahagian Cukai, Kompleks Kementerian Kewangan, Presint 2, PUTRAJAYA. Tel : ii) iii) Ketua Pengarah Kastam GST PORTAL iii) Customs Call Centre (CCC) Tel: / Fax: ccc@customs.gov.my 32