Effect of GST on Maintenance Fees and service fees for apartments and high rise buildings

The service fee or maintenance fees charged on residents living in apartments comes under the definition of taxable services under the GST act 2014.

Attempts are being made to get the Customs Department to exempt the service fees from GST.  If no exemption is given,  it will result in a higher fees or service charges, of at least 6% more.



The Board of Valuers, Appraisers and Estate Agents (Bovaea) are of the view that the fee collected by the Joint Management Body (JMB) or Management Corporation (MC) is for managing the property and not for profit and therefore should not be subjected to GST.

Will the Customs Department give their opinion in time before April 1, 2015?

Actually the bigger issue is, should the maintenance fees be exempted from GST, or classified as Zero rated supply.

If it's classified as exempt supply, then the JMB cannot claim the Input Tax of 6% charged by their suppliers.  The JMB will be forced to increase their service fee collection to cover the higher costs incurred in maintaining their property.   If they are exempted, they do not need to register for GST

If service fees is classified as zero rated supply, then the JMB will be able to claim the input tax charged by their supplier.  But they will be burdened with compliance costs as the GST returns will need to be made every quarter.     
 
Extracted form a report in the Star : No GST  on maintenance fees or service fees if  Customs Department gives the nod
  

Challenges of a GST tax regime

Malaysian GST will be  game changer for Malaysians.  It will radically change the Malaysian tax system and it doesn't look like Malaysians are ready for GST implementation come April 1, 2015.   Are Malaysians hoping that it is going to be an April fool joke? 

Challenge 1 - GST Registration 

The Government's biggest challenge is to get businesses to register under the GST system.  GST  registration opened in June 1, 2014.

As at middle of September 2014, only 40,000 of the expected 300,000 businesses have registered.  Slightly more than 13% have registered.  What about the rest of the businesses who are expected to be government tax collectors? .   

The deadline for GST registration is Dec 31, 2014, a mere 3 months away.    And  87% of businesses  have not registered.

The question we should ask is "why is there a slow take up rate for GST registration"

Could it be:
1. they do not know what is GST
2. they do not know they are required to register
3. they do not know how and where to register


I deal in accounting software.  So far, I have managed to get only about 25% of my customer base to upgrade their accounting software to the GST version.   Out of that number,  only 10% have registered for GST, and have gotten our help to redeem the eVoucher of Rm1000.00 to subsidise the purchase of the GST accounting software. 

So my database reflects the government statistics.  I do have a long way to get the rest of the customers to register for GST, and to claim their share of the GST subsidy.

Challenge 2 - GST awareness 

The bigger challenge for the Government is to promote better understanding of exactly what the GST is about.   People want to know the effect of GST for consumers and for businesses

Read more 


    

GST Training by Malaysia Customs Department

Malaysia  Customs Director-General Datuk Seri Khazali Ahmad said that the department would be conducting a “hand-holding” programme in October 2014 to provide GST registrants with a detailed explanation of the GST.

There will cover 19 industries under the hand-holding programme. These sectors range from agriculture, forestry and fishing to e-Commerce and international services.

Topics to be covered in the hand holding training programme:

• GST specific treatment for the business sector
• implications on cash flow
• impact on pricing policies
• implication to the accounting system
• work flows and process
• documentation requirements particularly tax invoice 
• GST reporting.

GST registration

Businesses can sign up for GST on the GST main website. 

GST Registration opened on June 1.   Todate only only 6,031 out of 300,000 potential registrants had signed up for the GST.  


Businesses are urged to register early, before Dec 31, 2014.  It is mandatory for companies and individual businesses with taxable supplies exceeding RM500,000 annually to register for GST under Section 184 (2) of the GST Act 2014. 


Those who fail to register for GST will face a maximum two-year jail term or a fine not exceeding RM30,0000 or both upon conviction.

The Customs Department will be cross-checking with the National Registration Department and the Companies Commission of Malaysia to ensure that business signing up for the GST are legitimate. The GST system will reject applications from non-existent businesses.


After you register for GST, you will be entitled to attend the hand holding session.

GST registrants are also eligible to apply for a GST e-Voucher from SME Corp worth RM1,000 to purchase a GST compliant software.



Malaysia GST Accounting Software

The GST website has a list of accounting software which has been tested for compliance with Malaysian GST guidelines.

You can also find out more information on approved accounting software from this website : Accounting software Malaysia  .   One such software suitable for Malaysian SMEs and which is  GST ready and GST compliant is MYOB Accounting System.

GST Registration : Status update as at July 2014

According to the Director-General of The Royal Malaysian Customs Department, about 160,000 businesses are expected to register their operations by year-end for implementation of the Goods and Services Tax (GST)..   However, since the GST registration began on June 1, 2014, only 4,000 businesses had voluntarily registered, with 3,900 granted approval for the new tax regime.

The Department will begin to the compulsory registration in September 2014.  The final date for GST  registration is 31 December 2014.

If you are still adopting a 'wait-and-see' mindset in preparing for GST, please do not wait any longer to be GST compliant. You can avoid bottleneck situations that is likely to happen closer to the implementation date.

It normally takes about 18 months for companies to prepare for GST, but businesses now have only nine months from now to April 1, 2014 to prepare for GST.


Companies needed to train their staff on the GST, acquire GST-compliant accounting software and commence trial runs by January 2015.

 Many businesses are unaware that they need to upgrade their accounting software to comply with the GST,  Such software upgrades cannot be done at the last minute, as extensive preparation and training is required.

GST will affect all businesses, whether they sell goods or provide a service.  It will also impact all parts of operations starting from the IT system, procurement, sales and marketing, the price setting department, supplier and customer relationships to cash flow.



Benefits of  registering for GST, early, rather than later 

• Claim your share of the government grant of  RM150 million to assist SMEs in purchasing the GST compliant accounting software or for upgrades, to be GST compliant.   The grant is in the form of a GST eVoucher worth RM1,000, provided by SME Corp Malaysia.
  The Governemnt grant is to encourage SMEs to use an effective and efficient accounting system as well as increase the GST compliance rate.

• Registered businesses would be taken through a hand-holding training programme where you will be given training on  six modules to prepare them for the GST implementation.   The training grant is worth RM100 million to businesses to send their employees for training in 2014 and 2015 on the new tax regime.

Tax benefits to businesses as an indirect result of  GST implementation 

With the GST implementation, businesses can expect to get additional  corporate tax benefits, such as

1. accelerated capital allowance until the year of assessment 2015 for the cost of purchasing ICT equipment and software
2. tax deduction on expenses incurred for training in accounting and ICT related to GST for the years of assessment 2014 and 2015.
3. Reduction in the corporate tax rate from 20 per cent to 19 per cent from 2016 for small businesses and tax deduction for secretarial fees and tax filing fee from 2015.

Further reading :

National GST Conference 2014 organised by Malaysia's national news agency BERNAMA and Tax Advisory and Management Sdn Bhd (TAMS),

GST registration

Businesses must register for GST before December 31, 2014

The maximum fine for non registration is Rm 20,000.00


Who should register 
If your business generates a total turnover of Rm 500,000 per year, it is compulsory for you to register for GST


How to register

1. Visit the MyGST portal, and complete the GST 01 registration form

2. You should read the guidelines to assist you in completing the form

How can you cheat the government out of its GST dues

Today's post is inspired by the article "IRAS goes after GST cheats"  which appeared in athe Malaysian local papers.


In Singapore, the GST is the No. 2 revenue-earner for the government after corporate income tax.  And they now stepping up the effort to find the GST cheats.

What are the areas where a GST registered business can cheat the government out of the GST dues?  Take note that if you commit these acts, you will be sentenced to jail.

Some of these offenses are committed out of ignorance, and some are committed out of negligence.  There are some who deliberately submit fake or inflated claims.  We hope you will take note of these offense and take steps not to repeat the offenses

1. Fraudulent claim for tax refund

GST-registered businesses can offset the GST they pay for their purchases, known as input tax, against the GST they collect from the sales of their products, or output tax.

If a business incurs more GST on purchases than it collects from sales, it can claim the difference as a refund from Iras.

Some cheat by claiming that they spent much more on their purchases than they actually did, in order to get a refund.   They are not able to produce proof of claims.


2. Fictitious business

One business volunteered to be registered for GST even though the whole turnover is below the threshold.  His company is a shell company.  He submitted fictitious invoices when there were no business transactions at all.

3. Collecting GST even though he is not registered for GST

Many non-registered companies collect GST from their customers eve though there are not registered. 

Consumers should make a point to check the Iras website to see if a business is GST-registered, so it is not easy to fool people into paying GST if a business is not authorised to collect it.



4. Failure to register for GST after reaching the threshold  

A business is required to register as a GST-registered business after reaching the threshold.  Failure to do so is an offense too.

It is easy to flout the GST laws because most businesses are not familiar with GST rules.  

Residential property to cost more under GST?

Will residential property cost more under GST? To answer this question, we need to take a look at the mechanics of GST for exempt supply.

Under the Malaysian GST Bill, it is proposed that the supply of residential properties be classified as exempt supplies.  Other examples of exempt  supplies are health services, childcare services, selected financial services, and transport services (bus, train, taxi, highway toll).

For purposes of GST, exempt supplies are not subjected to GST.  Consumers need not pay any GST on the purchase price of the residential property.   Although residential property is exempted from GST, the cost of building materials such as cement, steel, bricks, labour work etc, is subjected to GST.

The housing developer will not be able to claim the back the GST tax that they pay for the materials used to construct the residential homes. This will inevitability cause the supplier to increase the selling price of the homes in order to recover the additional cost incurred. 

There is time for the government to reconsider the treatment of residential housing for GST purposes.  In order to avoid a potential increase in the prices of houses, the government should consider classifying residential properties as a zero rated supply.   Zero rated supply is a taxable supply, where the GST rate is fixed at 0%.   A supplier of zero rated goods and services is eligible to claim the input tax credit, and therefore will not have a reason to increase the prices of homes.

 On another note, the government should also come out with clear rulings regarding residential homes built on commercial land.  For example, should GST to be charged on the sale and rental of housing units classified as SOVO or SOHO?

Malaysia GST Bill 2014 passed, finally.

The Malaysian Parliament passed the GST 2014 bill yesterday April 7, 2014 with 119 MPs voted in favour of the law, while 81 MPs were against it.

The contentious GST 2014 was passed after two bloc division votes were taken among the MPs.  The bill was passed for 2nd reading to 3rd reading in 2 days, with no debate held for the 3rd reading.

The Deputy Finance Minister said that the Government had done a survey on 689 consumer items to study the effects of GST on their pricing. 




Out of the 689 items surveyed, the results show that 

• no price changes : 329  (48%)
• cheaper : 287  (42%)
• more expensive : 73 (10%)

In addition, the proposed GST exemption for electricity usage is the first 300KW, up from 200KW previously announced.

The Government also expects a one-off 1.8% increase in inflation rate following the GST implementation but prices were expected to stabilise after that.  The Government will not hesitate to use the Anti-Profiteering Act and put people behind bar for those who unreasonably raise prices of goods.
 
The work has begun. 

If you are a business owner, 

1. assess whether your staff fully understands what they have to do in a GST environment 
2. assess the impact of GST on your cashflow
3. assess whether your accounting software is able to produce GST compliance reports
4. attend GST seminars

If you are a consumer (which is you and me, and everybody )

1. assess the impact of GST on your purchase decision of big-ticket item

Read more here  




 

10 benefits of GST for Malaysians

The Finance Ministry has come out with a list of 10 benefits of GST for the Malaysian business sector and consumers.

The 10 advantages of GST are

1. GST is an effective tax system.  It is a self-assessment tax and there are penalties to ensure compliance.  
2. GST is a transparent tax structure. The tax amount is clearly shown on the sales invoice.  Business and consumers will know exactly how much tax he or she is paying on the goods or services.
3. GST will ensure that everybody pays their fair share of taxes.  You pay tax when you spend.
4. Shadow business will be encouraged to register for GST, in order to claim for input tax credit.
5. With GST, there is a marked reduction in red tape and bureaucracy. 
6. GST will lower the cost of doing business.  The input tax paid is passed on to the next consumer on the supply chain, and is not a cost of doing business, unless you are not registered for GST
7. The lower income group will not be burdened.  The Malaysian government will give out BR1M aid to offset the impact of GST on the CPI (Consumer Price Index)
8. The export sector will become more competitive, as there is no tax on exports
9. For the nation, GST is an additional  form of income, other than income tax and petroleum tax
10. The prices of many items will come down, now that the GST tax is at a lower rate of tax of 6% compared to sales tax of 10%. 

It  is also noted that the GST implementation will have a direct impact on the CPI which would take 6 monhts to stabilise. 

Are you already planning to buy lots of toilet paper and other household necessities at pre-GST prices? .

   
Extracted from a Bernama news report of 10 advantages of GST
 

How SMEs should prepare for GST

This is a very good writeup of how Malaysian SME's should prepare for eventual introduction of GST

http://www.thesundaily.my/news/973007

GST Malaysia Workshop & Seminar 2014

Malaysia GST is scheduled to be introduced in April 2015.  The uppermost question in everybody's mind is - which accounting software provides GST invoice and calculation.

We are conducting a series of workshops, entitled  "How to use MYOB Accounting software to track GST transactions"

Register at our dedicated website   MYOB Accounting System   

This workshop is ideal for :

• existing MYOB users

• business owners who currently outsource their accounts

• business owners who currently use other accounting software which is not  GST- ready. 
  
  If you intend to buy a new accounting software in 2014, it is best you ask about the vendor's preparedness and experience in  GST implementation.  

Come and find out how MYOB Accounting software helps SME's in Singapore and Australia cope with GST calculation and GST form submission,  and how it is ready to assist Malaysian SME's in time to come.  

The current MYOB Accounting Malaysia software edition is already GST-ready.   It is capable of  calculating the correct GST amounts paid and collected, whether it is going to be Standard Rated, Zero Rated, Exempt Supplies or Out of Scope Supplies.   At the end of the period, to print GST report, just click Print. 

Come and ask your questions, on the accounting software part.  This workshop is more about how the MYOB software will help you record your transactions on a timely basis, in time for GST reporting every month, or every quarter, depending on the circumstances. 

For specific GST questions relating to your business, we ask that you refer to the Customs Department officers themselves. 

 
In this workshop, we want to share our knowledge of the following topics to help you prepare for eventual GST implementation.  

1. Overview of the proposed GST model for Malaysia
2. Scope of GST
3. Impact of GST on EVERY company's cashflow position
4. Demo on how GST and non-GST transactions are tracked in MYOB Accounting software.
5. GST reporting in MYOB software

This workshop is a sharing session with MYOB users and non-MYOB users. 

It is very important that you understand the effects of GST on your business, so that you can better prepare for it. Then go back to strategise and plan your next move.

Once again, click here to register for the GST Malaysia workshop :   MYOB Accounting System . 


If  for whatever reason, the above event is not updated, please send us a feedback.