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.