Friday, 2 October 2015

GST – The Good, The Bad and The Ugly

By now, most Malaysians would have contributed to the GST. So how are Malaysians faring with being charged an additional 6% for almost anything they buy? We asked a few Malaysians ranging from accountants, average individuals and low income earners on their take on the GST and how they were impacted by it.

Mr Wong M.K, Head of Finance (Travel agency)

From a business perspective, Mr Wong stated that the main challenge was on cash flow. According to Mr Wong, in the travel industry, once a customer books a holiday package, they will place a deposit first and pay the balance much later; therefore the company has to bear the output tax first, resulting in a mismatch in the cash flow. That being said, although the Customs Department provided seminars on GST, they did not provide a practical seminar on how GST transaction procedures should be made. On top of that, when approaching  the Customs Department, the officers usually did not respond to their queries or they were unclear on the issues raised, leaving many unanswered questions. 

When asked whether the cost of business had increased, he mentioned that there was no significant increase in the operating cost as they are able to claim the input tax paid and only remit the output tax from the customs. However, his only major concern was the staff salary. As GST is ultimately borne by the end user, his staff are feeling the impact. Therefore, the staff salary expense went up to compensate for the GST.

Finally, we asked whether the GST has benefited his business in any way, he stated that he doesn’t see any benefit whatsoever, claiming that  it has become a hassle as there is additional work to be done such as reconciliation of accounts.

One additional point he added was that after the implementation of GST, many customers have become more cautious when choosing the tour package, making the travel industry more competitive than before.

Ms P.O., Certified Practicing Accountant (Food & Beverage industry)

Since the GST was being introduced for the first time in Malaysia, we asked whether Ms P.O. had any issues since its implementation. She mentioned that she was lucky that she didn’t have any significant issues as she had experience with GST accounting in Singapore. The only concern was the Malaysian Customs had different interpretation of the GST terms, apart from that, there were no major issues when implementing the GST.

However, things were much more different when it came to the daily business operations. In the F&B industry, everything is on cash basis, as such, the 21 day rules basis as stated in the GST regulations is too short for the whole accounting process. As for the bad debt relief claim, under the GST legislation, a taxable person is only able to claim the output tax paid after 6 months should bad debts arise, however in her line of business, usually bad debts are written off within 3 months, creating cash flow issues. Furthermore, many of the ingredient costs have increased, requiring them to increase the price of their products, in which resulted in reduced revenue received as end users have reduced their spending.

“No! Absolutely not!” pointed out Ms P.O. when we asked whether she saw any benefit in GST. As the price of raw materials increase, more procedures had to be done for GST, and the end user has become more agitated on spending, so she doesn’t see any positive impact on the business.
“GST is a burden to everyone”, she concluded.

Lee Yvonne, Ms World Malaysia 2012

We had the privilege to ask the former beauty queen on how she was faring with the GST. “Ultimately the end user has to pay for GST”, she said. “The concept is that the end user has to account for the GST. As for businesses, they are able to claim the input tax paid and have to charge output tax and remit it to the customs." However, she clearly stated that it was bad timing to implement the GST as the economy is not stable and prices of goods have increased drastically even before the tax is implemented. In addition, most Malaysian’s wages are not up to par, thus it has impacted many Malaysian's daily lives.

Being careful with her expenses and being able to plan before making purchases, the GST didn’t impact her much, when asked whether her spending habits changed. “Planning and spending wisely is always crucial”, she pointed out.
The next question we asked was whether she saw any benefit for the nation with the implementation of GST. She said that it would be beneficial if the GST collected was spend wisely, such as for the nation’s development, free medical treatments, scholarships for educational development, etc. So long as the government can give back to the Rakyat in a good way, then it would be good. However, to see whether the revenue from GST was being used wisely would require time. “It is difficult to see any change in a short period of time, we would have to wait and see. At the moment, it is difficult to see any changes as it is the first year that the GST is being implemented,” she concluded.

Alvin Tay, Credit controller

“My life has changed drastically, there’s even GST for the service to renew your driving license,”was the first thing he said when asked how he was coping with GST. After the implementation of GST, he has reduced his spending, and has started cooking at home and spending less in restaurants. Moreover, he said he has started comparing prices between different brands and supermarkets. 
“6% is way too high”, he pointed out when asked whether the government should implement GST. “Especially when the currency is fluctuating and the economy is bad”, he added. But overall, he believes there is a political agenda behind the GST, that the government is using it to pay off its debts. Even if the government was not in serious debt, he would still be sceptical. “The government has made many empty promises previously,” he added. 
Lastly, we asked whether he thinks that the GST is good for the nation. He pointed out that if the GST revenue is used for a good cause, such as development of the nation, then it would be good. Furthermore, since the sales tax and service tax is abolished, there is one unified tax to be paid, as such certain items are lower with GST, such as cars. However, other items that were previously not chargeable for tax, would be an impact for many, mainly the low income earners.

Puan Nora and Puan Ani, Day-care babysitters

Lastly, we had the pleasure to ask a couple of former housewives on how they are coping with GST. As the two were from the low income group, the GST has affected them drastically. “We have both started working part-time as babysitters,” said both of the former housewives.

Many prices of goods have increased and on top of that they have to account for an additional 6% on the items they buy, not to mention the increase in prices even before the GST implementation. They also said that they don’t fall under the income tax bracket, therefore they don’t pay income taxes. However, with the GST, they are being forced to pay taxes.
Finally when we asked whether they were aware on the zero-rated and exempt supplies, both of them mentioned that they had heard about it, but were unclear what it was about. They actually thought that everything was chargeable to GST. “There was no proper conveying of the message from the government”, Puan Nora concluded.

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