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.  

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  




 

GST to be introduced in Malaysia

It's confirmed.  The Malaysian PM has just announced that GST will be implemented in Malaysia effective from April 1, 2015, at the rate of 6%.

In line with that, expenses related to purchase of accounting software and training in preparation for GST will be entitled to double deduction.

Malaysian GST : Basic GST model in Malaysia

What is GST ?  Basic GST model in Malaysia

• GST is also known as VAT (value added tax)  in many countries. 
   It is a multi-stage consumption tax on goods and services
  
• GST is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution.
  
  Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. The input tax incurred at the previous stage is always deducted by the businesses at the next step in the supply chain
  The end user or consumer is the one who finally bear the Goods and Services Tax.  
  
• GST is a broad based consumption tax covering all sectors of the economy i.e all goods and services made in Malaysia including imports except zero rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.

•  The basic fundamental of GST is its self-policing features which allow the businesses to claim their Input tax credit by way of automatic deduction in their accounting system. This eases the administrative procedures on the part of businesses and the Government. Thus, the Government’s delivery system will be further enhanced.  

How is GST charged

• GST is levied and charged on the taxable supply of goods and services made in the course or furtherance of business in Malaysia,  by a taxable person. 
  GST is also charged on the importation of goods and services.
• A taxable supply is a supply which is standard rated or zero rated. Exempt and out of scope supplies are not taxable supplies.
• GST is to be levied and charged at the proposed rate of 4% on the value of the supply. 
• GST can only to be levied and charged if the business is registered under GST. 
  A business is not liable to be registered if its annual turnover of taxable supplies does not reach the prescribed threshold. 
  Businesses can apply to be registered voluntarily (so that it can claim the input tax credit).  
  Non GST-registered company cannot charge and collect GST on the supply of goods and services made to their customers. 

Definition of 'supplies' under GST  

• Standard-rated supplies

      Standard-rated supplies are taxable supplies of goods and services which are subject to a proposed rate of 4%. A taxable person who is registered under GST has to collect GST on the supply and is eligible to claim input tax credit on his business inputs in making taxable supplies. 

• Zero-rated supplies

Zero-rated supplies are specific goods and services which are subject to GST at zero percent rate.   In this respect, businesses do not collect any GST on their supplies but are entitled to claim credit on inputs used in the course or furtherance of the business. To view the full list of zero rated supplies, 

• Exempt supplies

Exempt supplies are supplies of goods or services which are not subject to GST. In this context, businesses do not collect any GST on their supplies and are not entitled to claim credit on his business inputs. To view the full list of exempt supplies,  

• Supplies not within the scope of GST

Supplies which do not fall within the charging provision of the GST Act include non-business transactions, sale of goods from a place outside Malaysia to another place outside Malaysia as well as services provided by the Government sector.

Source:    Official website of the Malaysian Goods and Services Tax (GST).  In Malaysia, GST will be under the purview of the Royal Malaysian Customs department.

 .

Official website for Malaysian Goods and Services Tax (GST)

The Royal Malaysian Customs has created an official website for the Malaysian Goods and Services Tax

This is in preparation for eventual implementation of GST

There is a draft guideline on Tax Invoice & Recordkeeping,  which you may want to read and give your feedback before finalisation by the Customs Department. 

The guideline specifies the requirements when issuing Tax Invoice, Credit Notes, Debit Notes and what type of records you need to maintain.  All  records must be kept for 7 years