GST : Pressure?

Comes into GST calculation again,

For example, for Pemborong calculation, Cost RM30, Selling Price RM40, Profit RM10.00
Assuming no additional cost and no changes of selling price, Pemborong is able to make a profit of RM10.00, this profit is a Value Added differences, which subject to 6% X RM10.00= RM0.60.
Probably the answer is GP profit x 6% = RM0.60 out from your GP profit.

However, mind twisting calculation, GST has to be done through in accounting as for the following
a) Paid to the vendor   (RM31.80) : RM30 x 6%
b) Received from Customer RM42.40  : RM40 x 6%
c) Pay to GST Custom (RM0.60) : Contra

You are actually getting the same RM10.00 profit without increase price with same profit margin, which is not from your GP Profit. Custom getting RM0.60

However if ignoring input tax pay for vendor, it would be
a) Paid to the vendor   (RM31.80)
b) Received from Customer RM42.40
c) Pay to GST Custom (RM2.40)

You are getting the same RM8.20 profit only. Custom getting RM2.40.

With the threshold of yearly revenue RM500,000 would put a lot of SME into the GST registration. I have attended few seminars talk on GST, and I am experiencing the crowd or the audience are becoming more alert and aware to the GST. They started to ask questions and surround the GST officer during Tea Break. The audience was basically coming from different background and industries.

I noticed some of the questions given unanswered while some of the questions answer was rather ridiculous, which change the way how business should operates.

One of the example which suggest if the normal operating business receive part payment for the goods, with no intention of refunding, the deposit or the part payment is considered to have GST, when first payment received even though the completion order is to be taken place for about 3 months. I might notice that the "deposit" or "advance payment" or "part payment" or "progressive payment" into GST calculation.

During the seminar, the crowd pops up so many questions at once if the topics left unanswered or with an unsatisfied answer.Well, this is not the end, GST is progressing itself into coming months, such as corporatize the Royal Malaysian Customs Department? For either to further enhance the process or to have a person to be blamed on if unsuccessful implementation instead? or how the funds comes and go, and how people is going to audit this kind of process? and how people are going to feel the benefit from GST within 6 months or after 2 years? or increase GST rate more than 6% rather than ever thought of decrease GST rate in coming years?

As usual, there won't be any measurement or ratings to this such as quality of life is degrading or upgrading as compare to Singapore, just like how Malaysia university ranking.
 
So how would the reaction of the people in SME in general which left uncertainty but with promises from the government that always put other GST countries on the table as a proof for it.

Some of my friend would start to rethink about the business, whether
a) continue the business
b) to shut down the business
c) to divide the whole business
d) to slow down the business
e) to improve the business

What I do is to advise them is to improve the business, because to divide the business would incur more expenses due to the resources is not meant to be sharing such as shop, factory, finance, staff and top management people. SME has to be start thinking about the Customer and Suppliers which might in the other way round

a) continue their business
b) to shut down their business
c) to divide their whole business
d) to slow down their business
e) to improve their business

There would be less cashflow with the monthly approx 6% over gross profit given to the custom, the concept is a more alike
a) 6% monthly sales commission
b) franchise business

However the twisted calculation is a proof that you are getting the profit back, how come?
Therefore, to show impact on timeframe, cashflow is outflow faster than inflow although the profit is exactly the same. That's why customer and inventories level need to be structured right now.

Please do plan well to soften the impact.


Title 1

Title 2

GST : Impact

GST is meant to replace the current consumption tax i.e. the sales tax and service tax (SST), to enhance the efficiency and effectiveness of the existing taxation system in Malaysia which is more effective, efficient, transparent and business friendly.

GST comes with comprehensive tools and steps to safeguard its purpose. Let's see

a) GST compliance software 
is making the wave inside every taxpayer business system and dig every piece of information from the daily transaction and ledgers to be submitted online shown as GAF below stated in "GUIDE TO ENCHANCE YOUR ACCOUNTING SOFTWARE TO BE GST COMPLIANCE"

b) Speed up Income Tax Audit
Cross checking by Income Tax department would be much easier and faster since documentation is properly done for custom tax.

c) Eight (8) types of audit 
to ready to challenge tough taxpayer.
i) Desk audit - checking and verifying information on GST return
ii) Refund audit - verifying refund claim
iii) Transaction audit - verify transaction exist and correctly complied and reported
iv) Advisory audit - provide advisory GST education encourage voluntary compliance
v) Compliance audit - comprehensive audit conduct on all transaction
vi) Cancellation audit - comprehensive audit all transaction before any cancel GST registration
vii) Special audit - determined by DG
viii) Large Taxpayer Unit (LTU) Audit - ensure their full compliance to GST legislations.

d) Penalty for late GST registration and late submission
which provide extra collection for tax

e) Making Business people care about their monthly accounts or quarterly accounts
Accounts records need to updated as frequent as possible and finalized

f) Bill Tax Invoices within 21 days
No delay or excuse for negotiating pricing

g) Clear information on Credit Note
Putting Tax Invoice No, with reason

h) To maintain profit and stay competitive, please do claim input tax
Without claiming or lazy to claim input tax, business would earn less profit. Please calculate.

i) To maintain competitive, cashflow planning on Debtors, Creditors and Inventories
This is a tricky part, quarterly submission would require more planning than monthly submission due to its accumulate 3 months GST payment and especially import transaction. Keeping non common inventories would drag business cashflow for quite some time, while payment made to custom is prompt payment.

j) Straight forward estimation of 6% Gross Profit Margin from Income Statement, but the profit is remain in the business.

Cost RM 30, Selling RM40, Profit RM10.00, Custom Get RM0.00 for those business without SST

with GST 6% inclusive, without changing cost and selling price.

Purchase RM31.80, Selling RM42.40, Profit RM10.00, Custom Get RM0.60
Here is the workout :
a) Paid to the vendor   (RM31.80) : RM30 x 6%
b) Received from Customer RM42.40  : RM40 x 6%
c) Pay to GST Custom (RM0.60) : RM2.40 (pay output tax) - RM1.80 (claim input tax)

k) 100% Directors or Business Owner responsibility 
Getting Directors and Business owners to really really manage their business well. Any outstanding issue such as payment to custom or income tax, would put overseas travel on hold.

l) Provide job for quality staff and how to maintain them
Provide better job and salary for those qualified and ICT industries here to assist custom.

m) Single Taxable Person
This specific term used in GST to avoid artificially separate their business activities for the purpose of tax avoidance, perhaps it also meant for avoiding GST registration. Kindly consult your Tax person for more information.

n) Strict rules to those increase Pricing
There are to believe that there are slightly price increase in goods generally, however strict rules would be applied to those increase price higher than the shopping list that would be given on January 2015. This list definitely draw a line between able to make a profit or not and for withdrawing out some of the product on shelf if the price is incompatible to the market. Or else consumer has right to report their dissatisfaction.


All of the above is provided as a guideline only. Those who care about GST would work and sit down together with those who care about their business.

GST : Registration Particular

Everybody become more aware that registration actually starts on 1st June 2014. So far not many people have attended the GST talks, which might cost above RM500 per person which is claimable under HRDF.

For a smaller business, it could be a high price for a seminar, considered it as an expensive talk. Anyhow, registration has started. There is an urgency for saying "must register before 31 December 2014", which I might suspect, there would be a delay on processing due to many unforeseen and foreseen circumstances which delay company to obtain a GST ID number.

To avoid such unnecessary delay, 6 months is quite a sufficient time to get things ready, especially GST ID to appear in the Tax invoices and to appoint authorized person to handle GST beside own boss him/herself.  

GST registration form can be found with the link below. http://gst.customs.gov.my/en/rg/Pages/rg_fm.aspx  

GST registration online can be found with the link below. https://gst.customs.gov.my/TAP/_/

Form involved for initially is GST-01. GST-01 would tell what are the appropriate form needed while filling the form. Due to the advances of Information Technologies, email address is needed from the Business Owner or Directors or Person in charge. GST also request particulars of authorised person or person(s) to be registered in the form, which indicates who are the person in charge of GST for future GST audit or GST issue if arise. Particulars such as, name, I/C, email, telephone, fax, residential address, designation, appointed date, and signature are requested.


Of course, those who handle full set of accounts might fit in into this category because handling GST matters at the same time. Are we all ready for it? Below is the Industry Codes (Piawaian Klasifikasi Perindustrian Malaysia 2008) for your findings on industry code in the Part D GST-01 form.

GST : Tax Avoidance Clause?

As usual, if there is any fraud happening, the magistrates would issue a warrant, or search without a warrant, to the business entities. While running through the Guideline from custom, below is one definition on "SINGLE TAXABLE PERSON". Quite interesting is that, the Custom and the Act is giving solution on that by combining all business entities into one single taxable person regardless different business nature but sharing same kind of resources such as finance, economy and have closed relationship as an organisation in the business nature.

Let's have a look :-

Single Taxable Person : In General Guide from Custom

43. A single taxable person means two or more business entities which have been directed by the Director General to be registered under one registration number. Two or more business entities can be classified as a single taxable person when they artificially separate their business activities for the purpose of tax avoidance. All persons named in the direction by the Director General will be registered under one registration number and they may jointly nominate the name to be used for the registration of the single taxable person within fourteen (14) days from the date of the direction. Failing which, registration will be named as specified in the direction. The liability date for a single taxable person registration is the date specified in the direction.

Rang Undang-Undang CBP (GST) 2014
Arahan untuk mengira orang sebagai orang kena cukai tunggal

23. (1) Tanpa menjejaskan seksyen 20, jika Ketua Pengarah berpuas hati bahawa apa-apa perasingan aktiviti perniagaan adalah dibuat-buat yang menyebabkan pengelakan cukai, dia boleh membuat suatu arahan mengarahkan supaya orang yang dinamakan dalam arahan itu dikira sebagai orang kena cukai tunggal yang menjalankan aktiviti perniagaan yang diperihalkan dalam arahan itu dan bahawa orang kena cukai tunggal itu hendaklah bertanggungan untuk berdaftar berkuat kuasa dari tarikh yang ditentukan dalam arahan itu.

(2) Bagi maksud subseksyen (1), dalam menentukan sama ada apa-apa perasingan aktiviti perniagaan adalah dibuat-buat, hendaklah diambil kira setakat manakah orang yang berlainan yang menjalankan aktiviti perniagaan itu berkait rapat antara satu sama lain melalui hubungan kewangan, ekonomi dan organisasi.

For further explanation found from the General Guide GST,

Financial link refers to:

i. financial support given by one party to another;

ii. one party not financially viable without the support from another party; or

iii.common financial interest in the proceeds of the business

Economic link refers to :

i.seeking to achieve the same economic objectives;

ii.activities of one party benefit the other party; or

iii.supplying to the same circle of customers

Organisational link refers to:

i.common management;

ii.common employees;

iii.common premises; or

iv.common equipments

Example 1

X runs a restaurant business and sells food only whereas Y sells beverages. Both businesses share the same premise, employ the same employees and serve common customers. The total sales of food per year is RM 400,000 and that of beverages is RM150,000.

In this example, both businesses are not liable to be registered since their annual taxable turnover is below the prescribed threshold. However, it is obvious that the business activities of X and Y are intentionally separated in order to avoid from the requirement to be registered.

Both businesses fulfill the requirement to be registered as a single taxable person because of financial, economic and organisational links such as sharing thesame premise, having common customers, employing the same workers and utilizing common facilities such as chairs, tables, telephone and utilities.

As such, Customs will direct X and Y to be registered under one registration number.

Example 2

Encik Samy dan Encik Muthu own two partnership businesses providing legal services.

Legal firm A has a taxable turnover of RM300,000 and legal firm B has a taxable turnover of RM250,000. In this example, if it is proven that there are financial, economic and organisational links between the two legal firms, then these two partnership businesses will be directed to be registered as a single taxable person since the combined turnover of RM550,000 has exceeded the prescribed threshold.

GST : Wait and See MindSet in Malaysian?

Given more than 12 months for preparation on the implementation of Goods and Services Tax (GST) on April 1, 2015... everyone just seems like wait-and-see, grasping only the calculation on how 6% works. Not many people are aware that they are actually should have a plan for it. While Custom in other way around, always reminding us to refer to their website which is full of information to get ready for, with each different industry providing scenarios and examples. From internet google search, more people become aware of this topic, to search for more information.

Some people would rather think of, GST would be cancel due to the voice of the people. While the other side of the story, Custom or Government has already spending money on promoting GST, the more closer to April 2015, the more money has spent. Not forgetting budget 2014 has provided some comfort over the implementation of GST.

Therefore, the periods given is not the period for GST reconsideration, but to get ready for it. GST is not just a tax and financial issue.

It affects all parts of business operations starting from the IT system, procurement, sales and marketing, pricing setting department, supplier relationship, customer relationship to cash flow.

For instance, deadline submission, delay factor such as

a) Credit Note from Vendor Late
b) Invoice from Vendor Late
c) Computer down
d) Changing of Staff
e) No GST Staff
f) Unclear / Unsettle GST issue
g) Vendor not supportive on GST requirement, you cannot claim input tax
h) Tax reports are not tallying each other
i) Accounts not uptodate, which it includes expenses and capital expenditure (fixed assets) item.

would invites penalties and custom audit for delaying and not ready. Bear in mind, deadline would rather better translate as a full set of accounts would have been mostly completed during submission time either quarterly or monthly basis, which no more editing is to be allowed. It is easy to make mistakes if rely solely on human power without GST compliance software and a structured checklist or else there would be figures different from the Custom Report versus Income Tax figure.

Recommended Timing:-

May~Sep 2014 :
Checking GST registration criteria. more than RM500,000 annual sales, need register
Checking GST submission dateline criteria. Quarterly or Monthly
Checking documentation should have English / Malay
(* product item if in fully Chinese / Tamil - normally not accept due to accounting records)
Checking Filling System = GST Tax Filling System?
Checking Closing Stock Value = fully actual or not?
Checking software - GST registered or not? If not consider buying
Checking Manual Tax invoice + keyin method / Fully computerised Tax Invoice
Checking Vendor registered GST ID number.
Register your GST ID Identify Delay Vendor Bills
Identify Product Tax rate
Identify Different Type of Inventories, Going to be (Taxable / Exempt / Zero Tax)
Identify What are the adjustment normally
Operation Manual = documentation Getting Online System
Identify Internal Control
Who would be your ICT support for your monthly / quarterly submission. etc...depends on the industries,
Becareful, mixing type of Taxable product item industries is the hardest and complicated.

Oct~Dec 2014:
Those GST registered software, considered upgrading newer version
Getting a New PC Getting
Custom made Tax Invoice / Credit Note / Debit Note
Select a specific GST staff
Decide GST documentation = Accounting documentation Software Operation Manual, internal Control + security
Implement Internal Control Actual Stock Value as at 31.12.2014
Specify type of reason on Credit Note / Debit Note / Adjustment to the accounts.

Jan~Mar2015:
Those upgraded GST software, need to upgrade to the latest GST.
Do not change GST staff.
Do not modify accounts transaction unnecessarily
Actual Stock Quantity as at 31.01.2015
Actual Stock Quantity as at 28.02.2015
Actual Stock Quantity as at 31.03.2015
(* actual stock quantity is needed due to input tax and output tax = real stock quantity)
Accounts for 2014 completed.


START MAINTAIN YOUR GST PEOPLE / ACCOUNTS PEOPLE / ICT PEOPLE. If you are still waiting and see, the period given by Government for preparation would simply meaningless at all.

"Rang Undang-undang Cukai Barang dan Perkhidmatan telah diluluskan oleh Dewan Rakyat pada 7 April 2014. Seterusnya, pada 5 Mei 2014, Dewan Negara telah meluluskan rang undang-undang tersebut."

Click to Enlarge

SmartPhone Hidden Feature

One of the tools that I love would be the barcode app available in the Iphone as well as Android phones.

Whenever I go shopping buying grocery stuff, I would take out the phone and place it on the barcode and scan, if the item appears, it would show the price. If the price shown higher than the product in front of me, I would take it as a promoted product or reduced price item and it is time for me to buy.

Not everyone of us could ever remember every product price that we buy regularly and irregularly. Therefore this tools helps me a lot.

By the way, I could add in new product item, plus photos so that next time I could use it for reference.

Require : mobile phone, wifi internet, and barcode apps. Autofocus camera is preferable.

A configuration to :

You may download the apps as below and configure to link to my web program onsite :-

For Android

For Iphone

Contact : stevenglobal@yahoo.com
Type : Free to use

Accounting : Internal Control

Accounting : Internal Control (6 samples)
01. Control over Period and Date to avoid entered wrongly. 
Allocate which user will be responsible for which batch as in this case the "Pin."
Lock the batch for further editing at "Lock Status"      

      
02. Always trouble to check people work? Lock the batch for further entries 

      

GST Compliance Preparation

I personally recommend  'An Uncle's Guide to GST' book published by Choong Kwai Fatt, explains the concepts and mechanism of the GST and unlocks the complexity and technicalities of Malaysia GST's Model. It's a basic understanding to cover the important parts of GST.

GST is becoming more intense and pressure getting nearer for coming April 2015. Penalty awaits ahead for the late registration of GST and the late payment of GST. There are eight (8) type of GST Custom audit, would be carry on from time to time.

a) Desk audit - checking and verifying information on GST return

b) Refund audit - verifying refund claim

c) Transaction audit - verify transaction exist and correctly complied and reported

d) Advisory audit - provide advisory GST education encourage voluntary compliance

e) Compliance audit - comprehensive audit conduct on all transaction

f) Cancellation audit - comprehensive audit all transaction before any cancel GST registration

g) Special audit - determined by DG

h) Large Taxpayer Unit (LTU) Audit - ensure their full compliance to GST legislations.

There would be no modification is allowed after submit of GST for the respective period, and the GST compliance software is recording any amendment made to the accounts. Internal Control such as password, security and locking transaction is needed for proper implementation.

The impact is not merely on the 6% calculation but with the work of documentation, procedure and transparency towards custom for a monthly basis (for those who submit monthly) and for quarterly basis (for those who submit quarterly).

Performing an accounting work no longer a delay work, but to rush all the supplier invoices / credit note / debit note and as well as to invoice / credit note / debit note to customer at a timely manner. Business owners or any directors which has at least 20% of the ordinary shares is liable for the payment of tax due and payable by the company, any problem with that the income tax would put directors on hold for travel overseas. The travel status is found from the income tax website.

Though it is not stated clearly, but input tax and output tax has indicated that the Inventories system available in the GST compliance software would point out the actual stock quantity balance.

Well through the end of the financial year, the figure going towards custom has to be reflected into financial statement for the income tax.

As for the ICT part of the implementation, the deadline for the submission GST is the indicator that the ICT section has to be in a working condition for a long time, such as breaking down of PC/Server/Virus attack would probably delay the submission, before it happens, ICT section has to be well-planned such as who you are looking for.

During the implementation of GST on April 2015, there would be also a completing 2014 accounts during the same period. Therefore 2014 is a year for planning and execution if not 2015 would be a busy year.

Below is some guideline for those involve in the business and accounting work. I do offer services below, but a brief understanding between the services and the condition of the companies is needed.


You may reach me at stevenglobal@yahoo.com



Full view GST FLOW
Download GST FLOW

GST Online Information

GST website has ready with the following information

http://gst.customs.gov.my/en/Pages/default.aspx

One has already confuse with all the information spread out from the custom website, however, following are some guideline for your reference to search for information.

a. What you need to do
b. General Guide / Industries Guides

c. GST Registration Form/GST Registration Guideline (form is ready)

d. Exempted List /0% Rated List.

e. Specific Guide Item (13) - Sample Invoice

One might be concerned that all guideline from GST seems like a guideline, but it is advisable for you that some of the procedure need to get approval first, such as simplified Invoice format must get approval while full invoice format doesn't require. So with Credit Note, Debit Note, and Timing of issuing the invoice. All the GST submission must sent online, or else courier to KL centre. Claiming input tax (or we prefer to call it purchasing tax), the supplier invoice must contain sufficient  GST information to qualify claiming the input tax.

GST is to be paid once invoices is issued, although collection is done after 30 days / 60 days / 90 days /  120 days from customer. If you would like to seek for GST paid after payment is made from customer, approval need to be obtained.

Regarding foreign currency invoice, all must contain local currency in the same invoice based on BNM ALR custom given exchange rate.

Inventory : Internal Control

Inventory : Internal Control (6 samples)

01. A control system is needed especially for the followings:
  - Deleted Bills is kept or dispose
  - Negative stock quantity is allowable or not-allowable. 
  - Safety control password for
         a. Selling below cost : will result changes of product profit margin
         b. Minimum Selling price : result changes of product profit margin
         c. Selling above credit limit : giving more credit term for customer
         d. FOC item : result changes of product profit margin
         e. Edit Bills : for any editing bills, require password confirmation
         f. Delete Bills : whenever for deleting any bills, a password is required
         g. Second Print control : when printing more than once is required.
 

  
02. Menu accessed control

     

GST Malaysia Calculation

Effective 1 April 2015, Malaysians is implementing Goods and Services Tax (GST)  standard rated 6% or zero rated or exempted and exempted supplies.

"Persons" having businesses with annual sales turnover exceeding RM500,000 are liable to be registered under GST. "Persons" include an individual, sole proprietor, partnership, company, trust, estate, society, union, club, association or any other organization including a government department or a local authority which is involved in the business of making taxable supplies in Malaysia.
The annual sales turnover can be determined based on either:

• The total value of taxable supplies of the current month and the previous 11 months, or
• The total value of taxable supplies of the current month and the next 11 months.

Based on the table listed above, a business operator needs to register themselves in GST before able charging taxes to consumer. They may experience the following :-
a. Daily detail sales records is being captured.
b. Daily detail purchase records is being captured.

Therefore during year 2014, business operators are recommended to hold a proper accounting records, and to do a 100% stock check.